The tail wagging the dog is how Tom Hogan characterizes beef alliances. The operational efficiency and financial management consultant has no disagreement with the intent of alliances - to address the quality and consistency shortcomings of beef products and a weakening profitability situation for cattlemen.
But, Hogan sees alliances as akin to just another single-trait selection fad, much like the rush in the 1970s that resulted in cows of inefficient frame size.
"The bottom line is that there is 10 times more money laying out there for producers through improved feed conversion than there ever will be with carcass premiums," Hogan believes. "The concept of concentrating on quality and consistency is great but it can't be our single focus. Marketing is just one part of a strategic plan. There's not enough money in it to disregard all the other factors in management."
Hogan says few cattle producers really have a grasp on their costs of production. Without that, it's easy for a producer to lose his shirt to rising production costs while chasing a marketing premium.
Hogan recommends that producers first find out the carcass quality of their cattle.
"Retain a set of cattle, run them through to the rail and see how they do," Hogan suggests. "Once you've figured out where you are and where you want to be, pencil out what it will cost you to get there. For instance, how much will it cost you to move from a low-Choice Yield Grade 3 to a high-Choice Yield Grade 2? Is it worth it?"
Hogan is convinced a well-informed producer can do just as well as an alliance in marketing cattle if there's a total business management approach in the operation.
"The key is to avoid discounts. If that means a rancher has to participate in an alliance to learn how to do it, then join one. But in chasing a premium, don't lose sight of all the other efficiencies. That premium won't cover what you lose," Hogan says.
"Whether marketing through an alliance or outside of one, you're still a price taker and the only way you can be profitable is for production costs to be lower than your receipts," Hogan says.