Specialty and Innovative Livestock Markets

Lee MeyerExtension ProfessorDept. of Ag. Econ.Univ. of Kentucky

Presented at the Southern Region Ag. Outlook

Conference, Tunica, MS.

Sept. 23-25, 2002

Specialty and Innovative Livestock

Markets Objectives/Plan: Develop a Framework for types of market

innovations; Present a broad overview of types of

innovations; Discuss a range of examples; Consider Implications for Land Grant

University programs; Forecast changes in the market

environment;

NOT!

                                                              

Focusing on specialty enterprises distracts from the core of specialty

and innovative marketing

What is an Innovative/ Specialty Market?

Mainstream livestock & meat product;

Exploit some kind of opportunity;

A different twist – entrepreneurial;

Most have a mix of unique aspects.

Why, what has changed? CONSUMERS!

Health, convenience, wealth Commodities out, customized products

in; Communications technologies;

eg. Internet,e-mail, etc. Behavior

Processing and measuring technologies

Emphasis on “attributes” “tender” beef process and source verified “corn fed” beef “Natural” beef and pork “lean” beef Home Meal Replacements

(convenience) GMOs

Why Classify Attributes? Marketing means giving buyers what

they want – so understanding attributes helps this process

Markets are structured to deliver and price products Structure must take types of attributes

into account

Attributes -

Hidden vs. Visible

What we see has been the key in determining value, but because key attributes are hidden, the system doesn’t perform as it should Feeder cattle & retained ownership

Attributes -

Feeder calf vaccines Calf genetics/sire Pork health program Cattle feed program

Feeder calf condition Calf color CAB – black, Choice

Hidden vs. Visible

Attributes -

Direct vs. Indirect

The system has been focused on what is IN the product, but there is an increasing interest in the history of the product Organic products

Attributes -

Meat tenderness Meat lean/fat Juiciness

Humane standards Environmental

stewardship Antibiotic use

Direct vs. Indirect

Attributes – Capturing Their Value

Hidden Search costs Alliances and new

generation cooperatives

reputation

Indirect Certification

programs Direct markets Reputation

Other Dimensions - Increasing Competitiveness

Merchandising

Instrument Assessment

#1 - Pricing by Attribute Grid marketing

U.S Premium Beef - Producers earn increased returns based on attributes of grade, yield

Certification Programs Ky CPH-45 “Free Farmed”

                                          A producer-owned beef company

U.S. Premium Beef is a vertically integrated beef marketing company owned by beef producers from 37 states. U.S. Premium Beef owns Farmland National Beef Packing Company, the nation's fourth largest beef processing company, in partnership with Farmland Industries.

USPB offers beef producers the opportunity to own the beef cattle they produce on their ranches and in their feedlots all the way through value-added processing. Producers are paid on an individual animal value basis based on quality. Members receive individual animal carcass data at no cost to help them improve the quality of the beef the produce.

USPB cattle go into several branded products including Farmland Black Angus Beef , Farmland Certified Premium Beef Black Canyon Cattle Company Black Angus Beef and Farmland Family Entrees In addition USPB beef is also being marketed direct to consumers through Kansas City Steak Company, a high quality, portion control and mail order company, which Farmland National Beef purchased in 1998. 

A certification mark of Farm Animal Services

www.freefarmed.org

#2 Increasing Competition Using communications technologies

to bring in more buyers

Reducing transactions costs with communication and also cooperative efforts

 

 Atkinson Livestock MarketAtkinson, NE

Mobridge Livestock Auction

Mobridge, SD Live Video on Thursdays

Bassett Livestock MarketBassett, NE

                                                    

                                    

                                           

                                                                               Office: 605-225-2062 or toll-free 1-888-246-

995238458 133rd St. - PO Box 1827 - Aberdeen,

SD 57402-1827Regular Auction Held Every Monday!

Owners:Jim and Peggy Thorpe

Res.: 605-229-4045

#3 Merchandising Creating new markets by getting to

consumers in new ways; Using the internet; Using improved package delivery

services; Taking advantage of changing

consumer behavior.

Magnificent Tenderloin Filet and Stuffed Filet Mignons

Complete Trim USDA Prime

4-8 oz., $99.95

      

http://www.allenbrothers.com

Innovative Marketing – a mix of approaches Ranchers Renaissance/ Excel/ Kroger

alliance Process verified product

Advanced measuring• In cooperation w/ eMerge

Laura’s Lean Beef

Larger scale innovations

Welcome to the Laura’s Lean Beef Web site!

Laura's Lean Beef Company is growing! We're now available in more than 3,800 grocery stores in 34 states.

Our success is due in large part to our commitment to raise cattle without the use of added growth hormones or antibiotics. It may be a little old-fashioned in these days of high-volume, high-speed production, but we are convinced it's the right thing to do. Look at our label and you'll see what makes Laura's Lean Beef different from other beef.

We're proud to be the first naturally-raised beef certified by the American Heart Association. And you'll see from our Nutrition Facts that whether you're trying to lose weight or simply eat more healthfully, Laura's Lean Beef is an excellent choice.

As a family farmer, I'm involved in every aspect of my farm; I know my animals and I know my land. The other farmers who raise Laura's Lean Beef are the same way. Farming isn't just a business for us; it's part of who we are. The result is beef you can feel even better about.

Innovative Marketing – a mix of approaches Direct/Local Marketing

Green River Cattle Company Research approach

• Cost of production• Market research – value of “local”

Smaller scale innovations

Needed Support Systems Technical Help Business Assistance Market Environment

i.e. “rules of the game” Integrating help

Value – innovation is good

Which of these are the roles of Extension and LGUs? Technical Help Business Assistance Market Environment

i.e. “rules of the game” Need for research

Integrating help SMMART project as example

Who else are partners?

Vertical Coordination Markets vs. Integration Is diversity of attributes best suited

by markets? Alliances as a blend of market and

integration, using “arrangements” …

What is the Future? Expansion of certification systems More “branded” products Loss of commodity markets More proprietary information Use of measuring technologies ??

The CHALLENGELmeyer@uky.edu

Implications for LGUs