During last winter’s “Managing for Dynamic Change” Beef School , several speakers addressed the topic of marketing within the context of changes in the global beef industry, consumer demand, and risk management.  I’ll try to summarize some of the comments and strategies in this article.

             Nevil Speer, from Western Kentucky University said that the wrong question for beef producers to ask was: What’s the market going to be?  This type of questioning implies a mindset of being a price taker and marketing in the same way as in the past.  Instead, according to Speer, the right questions to be asking in these times are: What’s the business environment telling us?  How will management and marketing decisions be constructed around those business signals?  Where do new marketing opportunities lie?  Asking these types of questions implies a willingness to adapt to new markets, to use information to change production, management and marketing practices, and to attempt to manage market risks.

             Another place for beef producers to start when they are considering market strategies is to understand the consumer. Nevil Speer showed several slides in his presentation that indicated consumers are feeling the pinch of our economic recession.  Consumers are trying to reduce household debt and in doing so 71% are eating at home more often, 58% are increasingly using leftovers and 52% said price was very important in deciding where to buy food.  While these number could be used to support an argument for a decrease in beef demand, there might also be some opportunities hidden in those numbers.  For example, Dan Frobose, an OSU Extension Educator with the Agriculture Business Enhancement Center in Bowling Green , showed a slide with some results of a consumer study done by the University of Dayton . Of those surveyed, 66% said they would buy Ohio beef to support the local economy and local farmers.  If consumer dollars for beef are limited, it probably makes some sense to market in a way that appeals to those consumers.  Marketing locally may be an opportunity.

             We have all heard it said that consumers are increasingly concerned about where their food is coming from and Nevil Speer put up a slide from a May 2008 food survey that showed 76% of the respondents were more concerned about the food they eat now vs. five years ago and 73% of the respondents believe that the number of food related recalls has increased in the last year.  When asked to identify their food area of concern, 78% said beef.  Food safety issues and food recalls have an impact on public perception.  Nevil Speer showed a slide with comments from a 2008 USDA Outlook forum that said “Customers care about the background of their food” and “Each incident (food recalls) causes consumers to trust us (Smithfield Foods) a little bit less”.  Nevil Speer said that the future is going to be market-driven traceability of products.  It is going to be necessary to restore consumer confidence.  This will impact on what is required of beef producers to sell into commercial channels.

             Francis Fluharty, OSU Ruminant Nutrition Specialist and coordinator of the Ohio Beef Industry Center , showed a slide with some results from a survey of chefs conducted by the National Restaurant Association.  Various foods were ranked as “hot” based on their overall rank and indication of what consumers want.  Locally grown produce ranked number 2, organic produce was ranked number 3 and grass-fed items were ranked number 8.  For those producers asking about the market environment and marketing opportunities, these types of surveys might provide them with information to make some changes in at least some of their marketing strategies.

             What about global trends and global beef markets?  Will any of this impact the Ohio beef producer and how they produce and market their product?  Francis Fluharty began his presentation by looking at the changing beef industry and the consolidation in the beef packing/processing sector.  There are now 3 main big U.S. beef packers: Tyson, Cargill and JBS SA.  JBS SA is based in Brazil and is the world’s largest beef processor/packer.  It is number 3 in size in the U.S. after its purchases of Swift Foods and Smithfield Beef Group.  One of the slides that Francis used spelled out some of the implications of JBS SA now being a major player in the U.S. beef market.  It included the following points:

• USDA Choice is the world’s most recognized beef brand.  Certified Angus Beef (CAB) is second.  It makes sense to think that JBS SA will want to market these brands to the world.  As part of the U.S. beef packing industry, these brands will have access to world markets using U.S. quota agreements.

• In order to market these brands into various world markets, the U.S. beef market must adopt Process Verified Program (PVP) standards.  Those standards differ depending upon the country importing the beef. (PVP compliance allows sale of cattle into USDA Beef Export Verification programs.  For example, The European Union requires this to verify beef comply with the non-hormone treated cattle standards, while Japan requires it to verify that no beef comes from cattle older than 20 months.)

• In order to compete with JBS SA, Cargill and Tyson will adopt the same standards.

        The bottom line is that global beef markets and the consolidation of the beef packing industry may require that producers are enrolled in some kind of audit and verification program that will allow their calves to get a stamp of approval that could allow that beef to end up in a USDA export program; if producers are selling into the conventional beef market controlled by one of the major packers.

             In his presentation, Dan Frobose had a section on market access and a quote by John Sticka with the Certified Angus Beef (CAB) program that said: “Do you want access to the competitive value-based market of the future?  Better start getting together a resume for your cattle.”  What in the world is a cattle resume?  It includes documentation of genetic history, health history, management practices, feedlot and carcass history and identification from birth to harvest.  Another term we are hearing more often that fits this topic is: source verified.    This term includes the traceability or accountability of the animal from the farm of origin to the consumer’s plate.  Some key components of source verified cattle are:

• strict management and feed protocol to ensure herd health and a quality product

• record keeping and adherence to beef quality assurance (BQA) practices

• producer affidavits

        The driving force behind independent verification programs and source verification requirements is consumer demand.  So, how does a small scale cow/calf producer begin to develop some alternative marketing strategies?  Several different market options were highlighted at the beef school.  They included:

• The West Virginia Calf Pool:  There are a number of requirements in this program but essentially it brings together calves that are source and age verified, originate from  BQA herds and that are managed under BQA guidelines.  Calves must follow a vaccination program and be weaned a minimum of 45 days before delivery.  Calves are weighed, sorted and loaded at a central location specified by the marketing pool.

• United Producers Branded Beef and Source/Age Verified programs. 

• Great Lakes Family Farms Beef Alliance : outlines a suggested genetics program, sets requirements for calf identification, weaning before sale, vaccination program, and acclimation to grain before sale

• Pineland Farms and Wolfes Neck Natural Meats program that markets to the no-implants, no anti-biotics, natural market

        In all the examples marketing is about grouping together calves that have similar characteristics and adding value to those calves either by the fact that semi-loads can be marketed and/or providing some kind of verification program related to calf age, origin and standardized management practices. 

             I’ll close this article with two quotes that I hope provide something to think about.  The first is from Francis Fluharty to cattlemen at the Athens Beef School ; “We are in the food business, not the beef cattle business.”  The second is from a slide in the Dan Frobose presentation that said: “Producers who are open minded and willing to accommodate the desires of the consumer will survive, even prosper.  Those unwilling will find the future very challenging.”