Beef Marketing Alternatives

1. ATTRA Beef Marketing Alternatives
A Publication of ATTRA - National Sustainable Agriculture Information Service • 1-800-346-9140 • www.attra.ncat.org
By Anne Fanatico, This publication explores marketing alternatives for small-scale cattle ranchers who would like to add
NCAT Agriculture value to the beef they produce. Part One discusses methods to add value within the conventional
Specialist marketing system, including retained ownership and cooperative marketing. Part Two introduces
For technical alternative marketing strategies, including niche markets for “natural,” lean, and organic beef.
assistance, contact Production considerations for pasture-finished beef are given special attention. A section on direct
Lee Rinehart, NCAT marketing focuses on connecting with consumers and developing a product. Processing and legal
Agriculture Specialist issues are also covered. This publication also provides information on developing prices for retail beef
based on wholesale prices and desired mark-up, and for determining carcass value. A list of resources
© 2006 NCAT
provides suggestions for further reading, contact information for several producers and marketers of
“alternative” beef, and Web pages of interest.
Contents
Introduction ..................... 1
Part One: Adding Value
to Beef in the Conven-
tional Market.................... 3
Part Two: Alternative
Marketing of Beef........... 5
Conclusion ...................... 18
References ...................... 19
Resources ........................ 19
Photo by Lynn Betts, USDA Natural Resources Conservation Service.
Introduction weaning stage, by producing higher-grade
and heavier animals, by carefully managing
Under conventional production and market- the culling process, and most importantly by
ing, about half the value of beef is added minimizing the costs of production. Small
after cattle leave the farm, and net returns producers can further empower themselves
to the cow-calf producer historically tend to by forming marketing cooperatives or other
be low. At the sale barn, the rancher’s profit types of alliances.
is trimmed by wholesale price fluctuations, Some ranchers, however, judge the con-
“middle-man” fees, and the grading process. ventional market to be unresponsive both
ATTRA—National Sustainable Producers who sell in this highly competitive to their needs and to the changing desires
Agriculture Information Service
is managed by the National Cen- market can be described as “price-takers,” of consumers. These producers choose to
ter for Appropriate Technology competing with many other producers of rel- develop markets outside the conventional
(NCAT) and is funded under a
grant from the United States atively homogeneous commodity products. system. They add value to their beef by dif-
Department of Agriculture’s (Bastian and Menkhaus, 1997) ferentiating it from the supermarket fare that
Rural Business-Cooperative Ser-
vice. Visit the NCAT Web site Working within the conventional market, the is the end product of the commodity mar-
(www.ncat.org/agri.
html) for more informa- rancher can significantly increase profit per ket. Alternative marketing of beef primarily
tion on our sustainable head of cattle by retaining ownership past the means niche marketing and direct marketing.
agriculture projects.

2. The “niche” is simply a segment of the buy- point. Many others can be educated about
ing public unsatisfied with conventional beef the values they are fostering when they
and willing to pay a premium for a leaner, choose an alternative beef product over the
tastier, or more “natural” product. The most supermarket cut. Pasture finishing combined
likely way for the producer to connect with with direct marketing can substantially bene-
Related ATTRA these consumers is by marketing directly to fit the farm family, the rural community, and
Publications them. In the words of researchers at the Uni- the environment in the following ways.
versity of Wyoming:
Sustainable Beef • Keeping independent ranch families
Production
This approach can add value to cattle… [by on the land
Beef Farm Sustainability allowing] producers to capture much of the
Checksheet
margin otherwise going to middlemen in the • Protecting land from development
Rotational Grazing marketing chain. Of course, the producer
Pastures: Sustainable also “captures” much of the work and associ- • Reducing pollution of surface and
Management ated costs, as the producer must identify and ground waters
Nutrient Cycling in attract customers, perhaps provide added feed,
Pastures arrange for slaughter, distribute the product to • Building soil and plant diversity
Paddock Design, Fencing, customers, and secure payment. (Bastian and • Rebuilding local rural economies
and Water Systems for Menkhaus, 1997)
Controlled Grazing
• Passing down traditional farming
Assessing the Pasture Differentiating your beef from the conven- and animal husbandry skills
Soil Resource tional product entails changes in production
Contract Grazing
as well as marketing. If your customer is a Alternative marketing strategies can turn
Agricultural Business
meat packer, your production will have to price-takers into price-makers, but the added
Planning Templates
and Resources conform to industry standards for everything time, labor and resources needed to perform
Enterprise Budgets and from breed selection to use of antibiotics to these added functions beyond producing
Production Costs for yield and quality grades. But if your cus- a calf or yearling should not be underesti-
Organic Production
tomer is an individual looking for lean beef mated. “Marketing management expertise
Organic Farm Certification
& the National Organic raised and finished on a local family farm, or also is required, along with the traditional
Program raised organically, you will be working with a knowledge of the production side of the busi-
NCAT’s Organic Livestock very different production model. Integrating ness.” (Bastian and Menkhaus, 1997) The
Workbook – A Guide to
meat production and marketing may radi- more you learn and prepare before entering
Sustainable and Allowed
Practices cally alter the whole enterprise. For instance, a new market, the less surprising, expensive,
Organic Marketing to improve efficiency within the conven- and frustrating your “learning curve” will
Resources tional live-sale market, many ranchers have be. One of the more complete research proj-
Direct Marketing consolidated their calving schedules. Some ects conducted in the area of natural beef
alternative marketing strategies, however, production is described in a University of
may require year-round production to meet California SAREP report entitled “Natural
year-round demand. Beef: Consumer Acceptability, Market Devel-
(Levi et al., 1998) opment & Economics.” (see Resources).
The “Beef Marketing Flowchart” in the
Beef that is slaughtered above report will help you to understand
off pasture and sold the issues involved in pursuing different
locally is generally con- marketing strategies.
sidered more sustainable
than feedlot-finished, Keep in mind that if a marketing plan is
mass-marketed meat. to be successful, you must know the unit
Sustainability means cost of production (UCOP). For long-term
that the best interests of success, decisions need to be based on
the farm family, the com- the knowledge of what the UCOP is, and
munity, and the environ- whether it is competitive in the market-
ment are being taken place. An excellent resource for economi-
care of. For some con- cally based cattle marketing decisions can
sumers, sustainability is be found at Harlan Hughes Market Advisor
already a strong selling Web site (see Resources).
Page 2 ATTRA Beef Marketing Alternatives

3. Part One: curement, transportation, and selling
costs—costs that may be incurred if cattle
Adding Value to Beef in were in regular market channels. In most
the Conventional Market instances, when discussing retained owner-
ship, it involves actually owning your calves
Traditional cattle markets are fragmented, until harvest. This may or may not involve
and inefficiency seems to thrive in the beef other parties that background or finish the
production industry. The inefficiency also calves on contract prior to harvest.
creates opportunity for those willing to
do some extra work, assume some of the Prior to heading off into retained owner-
risk, and work with others. If you are will- ship, you might consider getting involved
ing to work differently and produce cattle in one of several Ranch-to-Rail programs
that the market wants, is it really that risky? that exist around the country. These pro-
Well, with proper planning, the disappoint- grams allow producers to gather informa-
ments should at least be fewer than when tion on how their genetics will perform in a
simply selling calves at the sale barn every feedlot and how the finished cattle may fit a
year, crossing your fingers, and hoping for marketing grid. These programs typically
the best. But, if your cattle don’t fit, and allow producers to enter a few head of cat-
you don’t want to change, then you prob- tle, combining them with other producers’
ably need to keep doing what you’ve always cattle to make full pens. Producers receive
done. That’s the thing about the open mar- both growth data and carcass data on their
ket: someone will always determine for you own cattle as well as the entire group, so
what the risk of owning your cattle is and that useful comparisons can be made. Con-
pay accordingly. tact your state Extension Beef Specialist or
One of the easiest ways to add value to your state cattlemen’s association for more infor-
own cattle is to know what the market wants mation on the availability of this type of
to pay for and then move in that direction. program in your area.
For example, the commodity beef mar-
ket currently wants Yield Grade 3 or bet- Alliances
ter, with a carcass weight of 750 pounds, In a marketplace dominated by large buy-
grading Choice, and reaching those targets ers, the independent small producer is at
before 15 months of age. a disadvantage. By creating economies of
Another guide to increasing profits within scale and allowing for effective coordina-
conventional marketing channels empha- tion, alliances among producers with simi-
sizes retained ownership (see Resources/ lar goals can add value to beef and increase
Retained Ownership). This production and the members’ marketing leverage. Alliances
marketing strategy offers certain advan- can integrate the cattle market both hori-
tages. Retaining ownership can lower pro- zontally (among producers) and vertically
Important considerations with retained ownership
• Producer size. Many producers will not have enough calves of similar kind to fill a pen at most feed yards.
Smaller producers may want to consider forming a marketing group to pool calves with other small producers.
• Cost of production. Knowing your cost of production is critical to making decisions regarding profitable
opportunities in the market.
• Information. Good, reputable information and awareness of current trends is helpful in marketing decisions.
• Financial requirements. Retained ownership requires additional capital and delays income. Can your cash flow
be adjusted to deal with these issues?
(Retained Ownership Strategies for Cattlemen. Davis et al., 1999)
www.attra.ncat.org ATTRA Page 3

4. (among producers, breeders, feedlot opera- grasp of their costs of production. Before
tors, packers, etc.). joining an alliance, Hogan recommends
first finding out the carcass quality of
An alliance is generally developed around
your cattle.
some common goals or values, which may
include a health and management pro- Retain a set of cattle, run them through to the
gram, a specific breed, a geographic iden- rail and see how they do. Once you’ve figured
out where you are and where you want to be,
tity, or an emphasis on leanness. Alliances pencil out what it will cost you to get there…
allow cow-calf producers to share equally The key is to avoid discounts. If that means
in potential profits through retained owner- a rancher has to participate in an alliance
ship, and improve beef cattle consistency to learn how to do it, then join one. But in
by grouping together animals of like type, chasing a premium, don’t lose sight of all the
finish, and cutability. Alliances do not guar- other efficiencies. That premium won’t cover
what you lose. Whether marketing through
antee profits. Premiums are given only to an alliance or outside of one, you’re still a
cattle that meet specifications. Good man- price taker and the only way you can be prof-
agement is the key. Most alliances pro- itable is for production costs to be lower than
vide carcass data feedback to producers. your receipts. (Roybal, 1998)
(Anon., 1997)
C
ooperative Marketing Cooperatives
Colorado rancher Dan Kniffen offers the
marketing following cautions for those considering An increasingly common type of alliance is
often takes whether to join an alliance. the marketing cooperative. A cooperative is
the form of packag- • The best source of information is a producer-owned, democratically operated
ing cattle in pools direct contact with the alliance’s pro- business with written by-laws. Cooperative
for sale. gram coordinator. Ask as many specific marketing arrangements among cattle pro-
questions as you can think of. Also ducers often take the form of packaging cat-
ask for names and phone numbers of tle in pools for sale. Packaging means that
other participants.
cattle are merchandized by putting them
• A good contract will protect both parties into groups with particular characteristics
in the agreement, providing a timetable to meet the needs of buyers. (Bailey, 1996)
and specifying the responsibilities and
fi nancial liability of everyone involved. While most cattle operations in the U.S. are
• Some alliances will require you to place relatively small, the marketing system is
a minimum number of cattle in the pro- geared toward large, uniform lots of cattle.
gram to participate. Almost all alliances The number of cattle in a lot influences the
have specifications on the genetic com-
position or biological type of the cattle
price buyers are willing to pay. The opti-
that are accepted. There are also limita- mum lot size for feeder cattle sold through
tions on carcass size and quality. a regular ring auction is 50 to 55 head; for
• The most critical aspect of an alliance a video auction the number rises to about
for the producer is the pricing formula. 240 head. Uniformity of weight and sex is
You must absolutely do your homework also important in getting the best price for
in this area. Once you’ve determined a lot. A study conducted at Utah State Uni-
how the base price is established, you versity found that buyers at a video auction
must pay particular attention to the
“premium” and “discount” categories.
paid approximately $1.70/cwt. more for
It’s quite possible to receive enough dis- uniform lots of cattle than for lots that were
counts on a few non-conforming cattle not sorted by sex and weight. This means
to offset all the premiums received on that a 500-pound calf sold in a uniform lot
a majority of the cattle. Producers who would bring $8.50 more per head than a
have some estimation of how their cattle similar animal sold in a non-uniform lot.
will perform in the feedlot as well as on
the rail are in the best position for this (Bailey, 1996)
type of marketing. (Kniffen, 1998) According to the 2002 Census of Agricul-
According to financial consultant Tom ture, the majority of farms with beef cat-
Hogan, few cattle producers really have a tle have fewer than 50 head. (USDA NASS,
Page 4 ATTRA Beef Marketing Alternatives

5. 2002) The average cow-calf operator, after extra work, and, obviously, a willingness
accounting for weaning percentage and to cooperate with other ranchers. For a co-
held replacement heifers, probably has op to work, rules must be fi rm, fair, and
fewer than 30 calves to sell each year— strictly enforced. The rules must set the
of both sexes and with a range of weights. quality standards of the group; any mem-
Packaging cattle into uniform lots of ber whose cattle do not meet the standards
optimum size is therefore not possible is not allowed to sell through the co-op.
for most individual cow-calf operators.
For detailed information and assistance
(Bailey, 1996)
on forming a cooperative, contact the
For the small producer selling in the con- USDA-RBS Cooperative Services Program
ventional market, a cooperative calf pool (see Resources). For a “yellow pages” of
is a great way to get the best possible existing alliances, contact BEEF Magazine
price. It does require commitment, time, (see Resources).
A Cooperative in Utah operates as follows:
1.) Each member of the co-op indicates the number of steer and heifer calves he or she will provide to the pool the com-
ing year. This becomes a marketing agreement between the co-op and the producer.
2.) The calves are pre-priced through a video auction using videos and descriptions of “representative” calves. The calves
normally are sold in six pools—three for steers and three for heifers, based on different weights. For example, the three
steer pools may have average weights of 450 lbs., 525 lbs., and 575 lbs. The pools normally range in size from 150 to
250 head. Pre-pricing through a video auction eliminates the need to gather the cattle to obtain bids. Producers know
the day delivery will take place and the price they will receive before the cattle come off the range.
3.) On the day of delivery, producers are responsible for bringing their calves to the load-
ing/unloading facilities. After unloading, the calves are brand inspected and sorted for
different pools. The sorted groups for each producer are weighed, and then are placed
into their respective pools. Records are maintained on the number and weights of cat-
tle for each producer in each pool. After the pool is completed, the cattle are loaded
and shipped.
4.) The co-op is paid by the video auction company and the co-op issues a check to each
producer based on the total weight they contributed to each calf pool.
Producers in this cooperative believe that pooling has been a very successful method for
them to increase the price they receive for their calves. No members of the co-op have
more than 200 mother cows, and some of the producers have fewer than 10 calves to con-
tribute to the overall pool. (Bailey, 1996)
Part Two: and inspired others to by-pass the industry
and market their own products.
Alternative Marketing
At the same time, the industry has faced a
of Beef continuing decline in beef consumption. By
Corporate consolidation in the beef indus- the early 1990s, chicken sales had surpassed
beef sales in the U.S. for the first time. (Levi
try has narrowed the marketing options for
et al., 1998) Factors in this decline in mar-
small-scale producers. It is increasingly ket share include the following.
hard for the family ranch at the bottom
of the food-processing chain to maintain • Lifestyle changes among consumers
acceptable profits. This environment has • Health risks associated with beef fat
pushed many ranchers out of the business, and with “red meat” in general
www.attra.ncat.org ATTRA Page 5

6. • Concerns about use of hormones, spent on thoroughly researching the poten-
steroids, and antibiotics tial markets for your product. You should
• Concerns about bacterial contam- also carefully read the ATTRA publication
ination Direct Marketing prior to any investment in
this area. Understand that niche market-
• “The inability of the consumer ing requires different personal skills and
to purchase a consistent, quality a tremendous time commitment. Be honest
product from the traditional meat in a self-assessment. Do you really have
case.” (Levi et al., 1998) the desire, dedication, skills, and willing-
ness to deal with consumers, retail buy-
Niche Markets ers, and government agencies? It may be
It is clear that the industry is failing to worthwhile spending your spare time for
meet the demands of a considerable num- a year collecting, reading, and analyzing
ber of consumers. The successful niche information about your potential market
marketer will target those poorly served before you invest in labels, advertising,
consumers, identify their needs, and pro- and retaining a large portion of the calf
duce a consistent, high-quality product crop for alternative markets.
that satisfies those needs. Before going into
direct marketing as a substantial source Alternative beef marketing operations typ-
of revenue for the farm business, serious ically describe their product with some
consideration and much time should be combination of the following terms: lean,
organic, natural, pasture-finished (or
grass-fed or grass-finished). Other common
selling points for alternative beef include:
Select market research and findings—a great source of “no antibiotics,” “locally raised,” “family
information and potential leads
farm,” and “humanely produced.”
• The appeal of purchasing locally produced meats
appears to be considerably greater among buyers from Before a beef product can be labeled with
commercial food service establishments not affiliated terms that denote uniqueness or superior-
with a chain than among chain-operated establishments. ity of some kind, the producer must fi le an
• Survey data indicate that unsolicited telephone calls “Animal Raising Claim” with the Labeling
are the single most important methods by which buyers Review Branch of the USDA. This involves
locate new suppliers, followed closely by trade show submitting a label application (FSIS Form
participation. 7234-1) and a prepared (manufactured)
• Eighty-four percent of surveyed buyers prefer that sales label that includes the claim in question.
representatives seeking business accounts with their In addition, an Operational Protocol (OP)
firms arrange a formal appointment rather than arriving that describes in detail the production
unannounced. practices employed, affidavits and testi-
• Buyers from higher monials, feed formulations, and any appli-
priced establish- cable certificates, must also be submitted
ments are also with the application. An OP must be in the
more likely to pur- producer’s own words and must state in
chase meat prod- detail how the animals are raised, includ-
ucts from a fam- ing ration formulations, sick animal pro-
ily-run agribusiness
and to advertise the
tocol, herd health management, and other
origin of their meat facts relating to the proposed claim (e.g.,
products on their “no antibiotics,” “natural,” “organic”). The
menus as a way term “chemical free” is not allowed to be
to distinguish used on a label. (Levi et al., 1998) For
themselves in the details on submitting an Animal Raising
marketplace. Claim, including specific requirements for
(Tropp et al., 2004)
the OP, contact the Compliance Assistance
Division of FSIS (see Resources).
Page 6 ATTRA Beef Marketing Alternatives

7. Lean beef Lean beef appeals to more than a niche
While the industry has paid some heed market—the mainstream consumer trend is
to the growing consumer demand for lean toward low-fat and fat-free foods. Though
beef, the existing system is still based on the industry has been slow to respond to
USDA standards that give the best grade to this reality, the grading process will most
carcasses with the most marbling. A grow- likely be changed to accommodate produc-
ing agitation within the industry seeks to tion and marketing of lean beef, which is
reform the grading process to better reflect defi ned as having 25 percent less fat than
current market trends. the industry average. While “organic” and
“pasture-fi nished” beef clearly represent
niche markets, lean beef is suited to the
conventional marketing structure. Lau-
ra’s Lean Beef (see box) is an example of
Laura’s Lean Beef a large-scale alliance that combines an
Based in Kentucky, Laura’s markets unconventional product with conventional
lean beef in nine states. No preserva- marketing methods. The small niche mar-
tives, salts, or fillers are used in pack- keter probably cannot rely on leanness
aging. Started in 1985 as a “value add- alone as a selling point. To compete with
ing experiment to a family stocker lower-priced conventional lean beef, other
operation,” by 1995 the company was qualities lacking in the mainstream prod-
debt-free, worth $20 million, and uct will need to be highlighted, with an
employing 30 people. Today, Lau-
emphasis on customer service.
ra’s Lean Beef is sold in 3,000 stores
in 33 states. Retail sales for 2001 are
expected to top $55 million. Organic beef
The company contracts with family Until recently the USDA did not permit
farms to raise genetically lean breeds “organic” labels for livestock products,
such as Limousin and Charolais, on nat- pending federal standards for organic cer-
ural feeds only, with no routine anti- tification. Even farm names with the word
biotics or hormone implants. Graz- “organic” were not permitted on the label.
ing, particularly rotational grazing, is
However, in January 1999 the USDA
an important part of the program, as
is low-stress handling of the animals. approved the use of a federal label for the
The cattle are pasture-finished, with a interstate sale of “organic meat.” (Hamil-
quick grain feed at the end. ton, 1999) As with other labeling claims,
the “organic” label must be evaluated
As a high-volume commercial busi-
ness, Laura’s Lean Beef is not suited
and approved by the USDA’s Food Safety
to working with small cow-calf pro- Inspection Service (FSIS). An application
ducers on an individual basis. Like the must be submitted, accompanied by the
beef industry in general, the company proposed label and the documen-
deals with truckload lots of uniform tation provided by the certify-
weights and breeding. Small produc- ing organization.
ers would need to create a coopera-
tive calf pool in order to work with the The Certified Organic Food
company, which does offer price pro- Directory lists organic
tection to ranchers with whom it con- beef buyers and suppli-
tracts. (Nation, 1995) Producers inter- ers around the country.
ested in the details of Laura’s cattle Some market conven-
program should visit the company’s
tionally; others direct-
Web site, www.laurasleanbeef.com/cat-
tleProgram/. See Resources for further market. (See Resources
contact information. for information on order-
ing this publication.) For a
more detailed discussion of
organic certification, and a list
www.attra.ncat.org ATTRA Page 7

8. National Organic Program—Livestock Standards
These standards apply to animals used for meat, milk, eggs, and other animal products represented as
organically produced.
The livestock standards state:
Animals for slaughter must be raised under organic management from the last third of gestation, or no later than the
second day of life for poultry. Producers are required to feed livestock agricultural feed products that are 100 percent
organic, but may also provide allowed vitamin and mineral supplements. Organically raised animals may not be given
hormones to promote growth, or antibiotics for any reason. Preventive management practices, including the use of
vaccines, will be used to keep animals healthy. Producers are prohibited from withholding treatment from a sick or
injured animal; however, animals treated with a prohibited medication may not be sold as organic. All organically
raised animals must have access to the outdoors, including access to pasture for ruminants. They may be temporarily
confined only for reasons of health, safety, the animal’s stage of production, or to protect soil or water quality.
USDA National Organic Program Production and Handling Standards
of certifying organizations, request the colorings or artificial ingredients” or “mini-
ATTRA publication Organic Certification mally processed”). “Natural” production
and the National Organic Program. Addi- methods must be documented. In popular
tional organic livestock publications from usage, the term “natural” commonly refers
ATTRA include the Organic Livestock to beef that has been raised mostly on pas-
Workbook and Organic Livestock Documen- ture, without routine use of medication. The
tation Forms. feed is not necessarily organic.
Producers interested in raising organic
beef should complete an economic feasibil- Coleman Natural Meats
ity study and do thorough market research
Based in Colorado, Coleman is the
before investing in this market. The require- nation’s largest producer of certified
ments are strict, and the additional docu- all-natural beef, and the first to receive
mentation can be cumbersome for some pro- a USDA “natural” label. Coleman con-
ducers, especially those with smaller herds. tracts with more than 600 ranchers
The annual fees for inspection can add a throughout the West to produce meat
significant cost to production; the additional without hormones or antibiotics, and
labor of daily record keeping can have a the vacuum-packed cuts are marketed
large impact on the profitability of this sys- nationwide in many natural and main-
stream food stores. Coleman promotes
tem. A key to using “organic” as a market- itself as a steward of the environment,
ing tool is to ensure that organic process- educating ranchers about grazing prac-
ing is available. Locating a USDA-inspected tices that improve range conditions. This
processing plant can be difficult, but an appeals to “green market” customers
organically certified, USDA-inspected pro- who seek ecologically raised products.
cessor is a very rare commodity. For more Their meat production is advertised as
economic information on organic beef pro- natural, humane, and “unhurried.” See
duction, see AgMRC under Resources– Resources for contact information.
Niche and Direct Marketing.
Natural beef
Under current USDA policy, meat may carry
the “natural” label if it contains no artificial
ingredients (color, flavor, preservatives, etc.)
and is minimally processed. The label must
explain the use of the term (e.g., “no added
Page 8 ATTRA Beef Marketing Alternatives

9. Pasture-finished beef a level of fi nishing 25 percent of cattle on
pasture, it would be a significant change.”
The 1997 UC-Davis report on “Natural
(Nickel, 1998)
Beef,” in summarizing the history of beef
finishing in the U.S., notes that: Pasture-fi nished beef (PFB) is lean beef.
The feeding of high energy, grain-based Sometimes it is fi nished entirely on pas-
diets to beef animals prior to marketing is a ture; sometimes there is a short period
relatively new phenomenon. Prior to World of grain-feeding (as in the case of Lau-
War II, beef was primarily fi nished on for- ra’s Lean Beef). The essential elements of
age. Beef animals were developed relatively high-quality PFB are high-quality pasture,
slowly on forage-based diets, were signifi-
cantly older at slaughter, and aged post-mor- appropriate genetics, young slaughter age,
tem to enhance tenderness… The majority of attention to factors that affect fl avor, and
these animals were marketed through small, aging of the carcass.
community-based packing plants, with the
financial rewards for the production and mar- High-quality pasture. “Bluegrass, orchard
keting of the product remaining in the local grass, brome grass, endophyte-free tall
economy. (Levi et al.,1998) fescue with a 30–50 percent component
In recent years there has been a resurgence of legume should be considered. Alfalfa
W
of interest in pasture finishing among North should not be overlooked if your situation
hat will
American graziers. The monthly periodi- is suitable for it. Tall fescue with high lev-
els of endophyte infection will not work. push the
cal The Stockman Grass Farmer is a forum
for these pioneers. Its editor, Allan Nation, We need animal gains of 2.0+ lbs. per day practice
proposes that producers of beef cattle begin and dirty fescue just won’t do it, particu- of grass finishing
to think of themselves as grass farmers, larly in the summer… Pastures should be forward are people
with pasture as their main crop. This is an kept vegetative—no seed heads—and 6–10 with environmental
idea whose time has come, though it is not inches in height at turn-in.” (Bartholomew concerns.”
a new idea. Nation quotes a classic refer- and Martz,1995) Management-intensive
ence book, Forages, published in 1951 by rotational grazing and other resource-effi-
Iowa State: “The grassland farmers are cient grazing practices are recommended.
often craftsmen in the culture and use of Several ATTRA publications on rotational
grass. [One] takes into account soils, plants, grazing and other grass-farming topics
animals, and interrelationships. Adequate are listed in the Resources section. Also
acreages of adapted grass-legume combi- be sure to check with local Extension and
nations are provided, depending upon soil NRCS personnel.
needs. High quality forages are emphasized Genetics. Good forage-converting genetics
in livestock production, with grains supple- are important. This means fast-maturing
menting rather than dominating the feeding breeds that tend to marble on pasture with
practices.” (Nation, 1997) The term “grass a lower amount of backfat. Ontario agrono-
farming” reflects the fact that high quality mist Ann Clark recommends using mainly
pasture is the prerequisite for healthy ani- medium-framed, early maturing British
mals and healthy profits. breeds. (Nickel, 1998) Smaller-frame Brit-
In 1997 The University of Missouri’s For- ish cattle are well-suited to direct market-
age Systems Research Center completed a ing, as families may like the smaller carcass
five-year study “designed to research the size and smaller cuts of meat. Research at
fi nishing of beef cattle on pasture without the University of Missouri’s Forage Systems
the use of a confinement feedlot.” (Martz et Research Center found that medium-frame
al., 1998) According to one of the research- cattle that fi nish at 1050 to 1200 pounds
ers, animal scientist Fred Martz, “What work well for pasture finishing. (Bar-
will push [the practice of grass finishing for- tholomew and Martz, 1995) The research-
ward] are people with environmental con- ers used Angus, Gelbvieh, and Hereford
cerns. Pasture fi nishing won’t ever totally crosses. Brahman influence is important in
replace feedlot fi nishing, but if we get to the South for heat tolerance. It is important
www.attra.ncat.org ATTRA Page 9

10. to note that cattle bred for feedlot finishing According to researchers at the University
may not work for PFB. of California, “The fl avor of the meat is
directly linked to the feed available to the
Young slaughter age. The most important
issue related to tenderness of beef is the animal. The traditional grain-fed product
age of the animal at slaughter. Plan to have has the advantage of a consistent feed that
pasture-fi nished cattle ready for slaughter in turn produces a consistent-tasting prod-
at 16 to 22 months of age. One “problem” uct. Grass-fed beef, on the other hand, is
associated with PFB that may be solved by reliant on the native forage available… The
slaughtering before 18 months is yellow types of grass can vary from field to field
fat. This is a problem due to public per- creating a problem in flavor consistency of
ception that beef fat should be white; it is the meat.” (Levi et al., 1998) Grain supple-
not a true quality issue. The yellow color mentation on pasture or a short period of
simply indicates a higher level of beta-car- grain feeding before slaughter can reduce
otene (precursor to vitamin A) in the fat or eliminate the “stronger” taste of grass-
of animals fi nished on forage. “Yellow fat fed beef. Also, pastures should be man-
on poultry and beef, extremely orange egg aged to avoid plants, such as onions, that
yolks and naturally yellow butter reflect can impart an off-flavor. PFB is defi nitely
high levels of chlorophyll in the diet and not synonymous with “bad-tasting.” Mem-
low levels of saturated fat.” (Salatin, 1995) bers of the Tallgrass Beef cooperative in
A direct marketer who educates customers Kansas fi nd that the flavor of their PFB is
about yellow fat might turn it into an asset preferred by their clientele, which includes
indicating a natural, nutritious food. In chefs. (Nickel, 1998)
any case, the consensus among producers Aging of the carcass. While researchers in
seems to be that if animals are slaughtered Missouri found no off-flavors in PFB, “the
within the 18-month age range, fat will not
taste panel did detect a lack of tenderness
appear yellow.
when the meat was tested right after slaugh-
Flavor. The taste of grass-fed beef dif- tering.” The researchers re-tested the beef
fers from that of grain-fed beef, although after it had been aged for one, three, and
the difference is usually subtle. Studies five weeks, and found that the PFB aged
in Missouri and Alabama have found that three weeks was equal in tenderness to
consumers could not distinguish between feedlot-fi nished beef. A PFB producer in
grain-fi nished beef and beef fi nished on New Hampshire, who markets under his
pasture. Still, PFB has a reputation for tast- own label, allows his beef to hang four
ing “stronger” than grain-finished beef. weeks. He feels that aging is very impor-
tant to quality. Aging also contributes to the
characteristic flavor associated with beef.
As noted earlier, the USDA grading system
is based largely on marbling. Because of
this, beef finished on pasture tends to grade
relatively poorly. In a University of Georgia
study that compared carcass quality of PFB
and feedlot-finished beef, the USDA grades
were split as follows.
Grass-fed: 15 percent Sta nda rd,
70 percent Select, 15 percent Choice
Grain-fed: 0 percent St a nda rd,
45 percent Select, 55 percent Choice
The taste panels, however, detected no dif-
ference in eating quality between the two
Page 10 ATTRA Beef Marketing Alternatives

11. types of beef. Canadian researcher Paul
McCaughey comments, “The taste panel Constraints to Finishing Cattle on Forage
work we’ve done shows there are many
factors affecting eating quality apart from • Genetic composition of current herd
marbling. In fact, USDA experiments have • Potential to produce both winter and summer annuals
shown that marbling accounts for only for continuous pasture availability
about 5 percent of beef’s eating quality—
• Productive capabilities and fertility of soils
yet marbling is what we base our entire
grading systems on.” (Nickel, 1998) • Viable number of marketable animals
Clearly, PFB sold conventionally under • Ability to adopt a grazier’s mindset when addressing
the present grading system will “take a challenges
price kicking—to the tune of $220/head,
• The ability and time to develop a consistent and
or up to a 24¢/lb. discount.” (Martz et dependable market
al., 1998) However, this loss may be off-
set by cost-of-gain savings. The five-year Whole Farm Planning for the Production of Grass-fed Beef, Southern
research project in Missouri showed cost SARE Project #LS00-113.
of gain for grass-fi nished cattle to be as
low as $27/cwt., compared to $60/cwt.
for feedlot cattle. Land, labor, interest, Strong evidence suggests that grass-finished
feed, and all other variable costs were beef is more nutritious and healthful than
included. (Nickel, 1998) The Missouri grain-fed beef. The case is presented defin-
researchers concluded that “cattle can be itively by Jo Robinson in her recent book,
fi nished on pasture and the resulting beef Pasture Perfect. All PFB producers should
will be acceptable for the conventional read this book and use it as a reference
meat trade… The use of maximum inputs to educate customers. See Resources for
of pasture into the fi nishing of beef will ordering information.
usually result in the most economic gains
as long as cattle are taken to a level of Direct Marketing
fi nish to grade Choice and/or Select and Before beginning an alternative market-
market discounts are avoided.” (Martz et ing enterprise, understand the differences
al., 1998) But until the conventional mar- between commodity marketing and direct
ket learns to deal rationally with PFB, marketing. Allan Nation, editor of Stockman
alternative marketing structures are bet- Grass Farmer, puts it this way:
ter suited to this premium product. Rather
A commodity orientation means that as long
than being graded and sold on the hoof, as you meet the specs and can stand the price
PFB is typically custom-processed and you pretty much tell everyone else to go fly
direct-marketed to consumers. a kite. Such a selfi sh attitude absolutely will
not work in direct marketing… In the U.S.,
A recently completed SARE project, consumers expect an attitude of deference
conducted by ATTRA, the University of and responsiveness to their wants and needs.
Arkansas, and the University of Tennes- If you are unable or unwilling to develop—
see, determined that quality grass-fed beef or convincingly fake—such an attitude, stay
in commodity-priced agriculture. However,
can be produced economically. It retains if you see service to others as a noble call-
inherent nutritional values if the proper ing, don’t let the lack of specific marketing
supplements are used in conjunction with or production skills deter you. Aptitudes are
quality forages. The study worked with ten rather easily learned. It is our attitudes that
farmers in northwest Arkansas to evaluate are difficult to change and that most often
determine our fate. (Nation, 1999)
the possibilities for grass-fed beef produc-
tion. It concluded that not all farms have Direct marketing brings the producer and
the capabilities to fi nish cattle on forage the consumer together in a way that the
due to several constraints. mass market cannot, and this is its great-
www.attra.ncat.org ATTRA Page 11

12. est strength and advantage. Direct market- completely satisfied with. “A new business
ing is “relationship marketing.” The fi rst needs virtually 100 percent customer sat-
step in building the relationship is to iden- isfaction from day one to survive. This is
tify your customers. They will not be “just because any new business is necessarily
anybody.” Your customer base will consist drawing from a very small customer base.”
of folks who desire a special product, and (Nation, 1999)
their needs should be your fi rst consider-
The authors of the University of California
ation, before you actually develop your prod-
uct. First, talk to potential customers one at study Natural Beef: Consumer Acceptability,
a time. Find out what characteristics they Market Development and Economics recom-
value most in a premium beef product— mend transferring only a portion of your
high quality, low price, leanness, organic or cattle production into the new system at
“natural” production, home delivery, par- fi rst. This will give you an opportunity to
ticular cuts, and so on. Develop a brand learn the ups and downs of alternative mar-
name and a marketing/packaging strategy keting while putting only a small percent-
that capture the most important of these ele- age of your income at risk. Diversify your
ments, and preview your “brand” to your production a portion at a time, increasing
the number of animals in the new system as
I
intended customers.
t is both risky you develop retail skills and market connec-
and inefficient When you feel you have the right combina- tions. (Levi et al., 1998)
to develop a tion to appeal to your niche market, then
develop the actual product. This approach While you have “relationship marketing” on
product first and
can conserve resources, including your lim- your side, the major beef packers have econ-
then try to find a ited capital. It is both risky and inefficient to omy of scale on theirs. Since you will not be
market for it. develop a product first and then try to find a able to compete with mainstream beef pro-
market for it. Remember that the “product” ducers in terms of price, you must deter-
is much more than the beef itself; the prod- mine the appropriate premium to place on
uct is also service, packaging, your farm’s your product. Pricing is a critical and dif-
identity, your production philosophy, and ficult task, and under-pricing is a common
even price. For your product to stand out pitfall. The price has to cover costs of pro-
from the competition and attract repeat cus- duction, re-capitalization of the enterprise,
tomers, it must be carefully differentiated and an acceptable profit. Profit should be
from other types and brands of beef. planned for at the outset. If profit is thought
of as “whatever is left over,” there will prob-
Take time to develop your beef product and ably be no profit. At the same time, an
work the kinks out of the production pro- over-priced product will not sell. Your ini-
cess. Begin by making the product for your- tial market research should determine mar-
self and your family. Next, produce it for ket size, market share, and the price your
your friends who have tried it, liked it, and niche consumer is willing to pay for pre-
asked for it. The last step should be mar- mium beef. Is that price sufficient to make
keting to consumers. Allan Nation writes, this a profitable venture?
“If you are considering getting into direct
marketing, don’t bet the farm on it. Keep Joel Salatin, a nationally recognized grazier
doing what you are doing for a living and in Virginia, has been very successful at rais-
start learning and experimenting on a small ing and marketing pasture-fi nished beef.
scale… [T]he best guinea pig for this period He earns $200 to $300/head net by direct
of trial and error is yourself, your fam- marketing to 400 regular customers. (Sala-
ily and your friends.” If your family and tin, 1995) His book Salad Bar Beef presents
friends are not crazy about your grass-fed a proven production and marketing system
steaks and don’t request more, “you are “that can make an excellent profit from a
still in your apprenticeship period and are small cow herd regardless of the commod-
not yet ready to be in business.” Don’t try ity price of calves.” “Salad bar beef” is
selling anything that you yourself are not Salatin’s consumer-friendly term for lean,
Page 12 ATTRA Beef Marketing Alternatives

13. healthy, tasty meat raised locally on fresh, Salad Bar Beef is recommended read-
high-quality pasture. Salatin describes a ing for anyone considering alternative
three-pronged approach to developing a cli- beef marketing. It covers both production
entele for this type of beef: and marketing topics, all from the per-
1) Samples. “We knew that the only way to get spective of a successful alternative beef
people to buy salad bar beef was to get it into operation. See the Resources section for
their mouths. We gave samples to anyone we ordering information.
thought might be interested. Over the years,
we’ve never given anything away that didn’t Salatin sells his beef and other farm prod-
come back fourfold… Free samples are one ucts direct from the farm, taking orders
of the underpinnings of successful market- once a year by mail and phone. Other
ing. We found a tremendous prejudice to potential outlets for direct sales to consum-
non-grain beef. People by and large just
knew it would be tough, stringy and gamey. ers include farmers’ markets and local gro-
To overcome that, we had to introduce them cery or health food stores interested in car-
to it without any risk. The response has rying farm-fresh products. Stores, however,
always been tremendous to this technique.” are usually uninterested unless you can
2) Education. “We put together a slide pro- ensure a steady supply.
gram about our farm, titled it ‘Environmen-
tally Enhancing Agriculture’ or whatever the Upscale restaurants constitute another pos-
group wanted to call it, and began making sible outlet. Many chefs appreciate the fla-
presentations for local organizations” such vor and freshness of locally raised, grass-
as Rotary, Kiwanis, Women’s Clubs, Garden fed beef. Some restaurants have developed
Clubs, and American Association of Retired informational packets on where their ingre-
Persons (AARP). “The program is educa-
tional, not a sales pitch. But at the end, quite
dients come from, “to build rapport with
innocently, I’ll say, ‘Now if any of you would customers and set the restaurant apart from
like to participate in this type of agriculture, other dining experiences.” (Levi et al.,
I happen to have some order blanks with me 1998) Quality and consistency will be this
and you’re welcome to sign up.’” market’s main concerns. Chefs may be inter-
Other educational methods include bro- ested in prime cuts as the majority of their
chures, newsletters, newspaper articles, purchase, making it necessary to develop
and one-on-one conversations. It is up to other marketing outlets for hamburger and
you to educate potential customers on how
and why your beef is different and bet-
roasts. Marketing to restaurants may pro-
ter than the conventional product. Educa- vide the greatest return on investment for
tion should include instructions on proper primal cuts, but is generally smaller in vol-
cooking as well. Salatin points out that the ume and requires more work per unit of
common fast-cooking methods are suited to sales. (Levi et al., 1998)
marbled USDA Choice, but not to grass-fed
lean beef. He recommends slow cooking his
beef for the best taste, greater tenderness,
and improved digestibility.
3) Customer Appreciation. This gets to the heart
of “relationship marketing.” When the con-
sumer knows and trusts the producer per-
sonally, the relationship built between them
is not easily broken. Good sellers know and
use their customers’ names. Loyalty helps
bring in repeat customers. The greater the
loyalty and satisfaction, the higher the likeli-
hood of repeat business even though cheaper
beef may be available at the grocery store.
“The two things supermarkets cannot do are
provide high-quality food and offer a rela-
tionship.” By giving detailed, personal ser-
vice to his customers, Salatin ensures that
they will spread the word about his product.
(Salatin, 1995)
www.attra.ncat.org ATTRA Page 13

14. Taking your operation from live sales to ington. See the Resources section for con-
marketing of meat may require changes in tact information and more links to articles
your production focus. Inventory manage- about cooperative efforts.
ment will be a primary issue. Beef produc-
ers who have had a short calving and mar-
keting period for the sake of efficiency may
Legal Considerations
have to time production to match variable Marketing activities are affected by a wide
consumer demand. Restaurants often have variety of laws and regulations at federal,
a highly variable demand for products, so state, county, and city levels. While regula-
you may either have to carry inventory or tions vary by type of enterprise and loca-
be able to move products quickly from live tion, some general rules apply to all areas
to useable form. Selling directly to con- of direct marketing. Some of these legal
sumers as Salatin does could allow you to considerations include the type of business
focus on seasonal production. Freezing beef organization (sole proprietorship, partner-
increases the ability to manage inventory, ship, etc.), zoning ordinances, small busi-
but adds storage charges to the cost of pro- ness licenses, building codes and permits,
duction. Generally, the larger the scope of weights and measures, federal and state
Y
your enterprise and the more outlets you business tax issues, sanitation permits and
our best have, the less challenging inventory man- inspection, food processors’ permits, and
resource for agement will be. (Levi et al., 1998) many, many others. If you plan to employ
informa-
This section is only an introduction to some workers, there will be still more require-
tion and inspiration aspects of direct marketing of beef. The ments to meet, such as an employer tax
is fellow producers, ATTRA publication Direct Marketing pro- identification from the IRS and state work-
whose experience vides more detailed information on enter- ers compensation insurance. Environmental
can save you many prise evaluation, marketing research and laws also influence farm operations.
surprises and
planning, promotion and publicity, pricing Always check with local, state, and federal
and profitability, and direct market alterna- authorities before marketing any food prod-
missteps. tives. Another good source of information is
uct. Processed foods are heavily regulated
the SARE publication How to Direct Market
to protect public health. Stay informed,
Your Beef. Also refer to the Resources sec-
since rules and regulations change often,
tion of the present publication. Your best
resource for information and inspiration and keep good records to prove that you’re
is fellow producers, whose experience can in compliance.
save you many surprises and missteps. Adequate insurance is essential. “The
closer you get to the consumer by direct
Cooperatives for Alternative marketing, the higher the liability risk.”
Beef Marketing (Levi et al., 1998) Every operator should
have a general insurance policy to protect
Co-op marketing can be adapted to alter-
against loss of buildings, merchandise,
native markets. A great example is the
CROPP cooperative, which markets cer- and other property. A general policy may
tified organic dairy, eggs, produce, and include liability insurance for products and
meats nationally under its “Organic Valley” premises. However, general comprehen-
brand name. Formed in 1988, CROPP is sive farm liability insurance often does not
now the largest producer of organic dairy cover on-farm marketing or direct market-
products in the U.S. Among the more ing operations. A separate employer’s lia-
recent additions to its product line is pas- bility insurance policy may be required to
ture-fi nished beef, marketed as Organic protect you should an employee be injured
Prairie. CROPP is a farmer-owned and on the job. See Resources for information
operated marketing cooperative, consisting on The Legal Guide for Direct Farm Market-
of more than 190 small to mid-sized fam- ing by Neil Hamilton of Drake University
ily farms in 10 states, from Maine to Wash- Law School, a comprehensive primer on
Page 14 ATTRA Beef Marketing Alternatives

15. the many legal issues that surround direct
marketing of agricultural products.
Production Note:
To castrate or not to castrate?
Processing and Packaging Some producers who direct market do not castrate their bulls
Processing is an important consideration (producers who market conventionally do castrate, since they get
for direct marketers. Custom facilities are docked for intact males). Bulls put on weight 17 percent faster than
generally cheaper to use. Large commer- steers and make leaner gains, giving them a higher dressing per-
cial, federally inspected plants may not centage. However, they may need to be slaughtered young (by 18
be geared to do custom butchering for the months), to minimize gristle, and be run in a separate herd to pre-
small beef producer. Producers should con- vent unplanned breeding. But separating the herd may not be con-
venient. Joel Salatin, for example, chooses to castrate so that he can
tact their state department of agriculture for run all his cattle in one herd.
regulations about meat processing and sale
to the public.
Beef must be slaughtered and inspected at
a federal- or state-approved facility in order works with small and very small process-
to be sold to individuals, as in the freezer ing plants to comply with the HACCP. To
beef trade, or to restaurants. If beef is pro- learn more about HACCP mandates, or to
cessed at a custom facility that is not feder- obtain copies of FSIS-developed models to
ally or state inspected, then it can only be design least-cost HACCP-compliant small
sold prior to slaughter. (Bartholomew and facilities, contact FSIS (see Resources for
Martz, 1995) This means the cattle must contact information).
be sold by the head or by live weight, which Retail and individual meat sales require
doesn’t account for wide variations in dress- packaging in accordance with state and
out percentages between animals. Joel Sala- federal food laws. Since good packaging
tin deals with this dilemma by selling his enhances sales, label design and presen-
animals for $1 per head and then adding tation are important. Vacuum packaging
shipping and handling charges based on provides superior product protection com-
carcass weight. However, we cannot rec- pared to hand-wrapping. Feeding high
ommend this practice. The liability risk levels of Vitamin E for two weeks prior to
involved should not be underestimated. slaughter increases the shelf life of meat.
Producers considering constructing a (Levi et al, 1998)
slaughter facility for their own beef should Many folks have questions about the
remember that federal, state, and local amount of edible beef a carcass gener-
regulations govern the process. The axiom ates. A good article on the topic, “Did the
“ignorance is not an excuse” applies here. Locker Plant Steal Some of My Meat?”
Farmers who intend to process on-farm by Duane Wulf, PhD, can be found at
should be aware of all federal, state, and http://ars.sdstate.edu/meats.
local regulations. Your state departments of
agriculture and health will have informa- Pricing Your Product
tion about regulations. Your county Exten-
sion office should be able to direct you to A common question among producers look-
the county agencies that regulate zoning, ing to direct market is what to charge for
the various retail cuts from a beef animal.
health, and other local regulations.
A list of prices from another supplier may
In 1996, the USDA’s Food Safety and be a possibility, or research prices in the
Inspection Service (FSIS) announced grocery store. However, someone else’s
implementation of new rules meant to prices won’t help you understand how to
ensure the safety of meat products. A major price your own products to ensure profit-
component of the regulations is the Patho- ability. Organic beef price research can be
gen Reduction/Hazard Analysis and Criti- even more difficult since few price lists are
cal Control Points (HACCP) system. FSIS available. Currently, USDA does not report
www.attra.ncat.org ATTRA Page 15

16. organic beef prices on a weekly basis as it yields and the pounds of retail meat that
does for commodity beef. can be expected.
The key to profitable pricing is to deter- A processor may be able to cut a beef car-
mine actual cost of production for a mar- cass into 40 different cuts. The question
ketable calf. Find all processing, market- you must ask is whether all 40 of those cuts
ing, labor, and management costs for a can be sold to customers at a profit? Mar-
quantity of beef produced, typically on a ket research is important to gauge the vari-
carcass basis. This method of actual cost ous cuts and the quantity that customers are
determines the break-even price for beef, willing to purchase. Round steak can be a
including organic product. large portion of the retail weight generated
Perhaps one of the worst errors you can from the rear leg of a carcass. But round
make in direct marketing is to sell your steak is lean and somewhat chewy, and is
product at a loss, while believing you are considered a low-value cut requiring some
making money. Sooner or later the loss preparation in the kitchen to be palatable to
catches up with you and it can’t be made most families. Is your market for this partic-
up with volume. ular cut large enough to move it, or should
you consider other alternatives? The point
M
arket Even if you don’t have actual production is that just because your processor can pro-
research figures to use, good, conservative pro- duce a certain retail cut doesn’t necessar-
duction budgets are available to base a ily mean it should be ordered. A continual
is impor-
preliminary plan. Consult with the state problem with direct marketed beef is the
tant to gauge the Extension beef specialist to get accurate less glamorous cuts like round steak and
various cuts and production costs for your area. various roasts. Would you be better served
the quantity that to make another product, add some value,
Get reasonable estimates, or better yet,
customers are actual carcass cut-out data, to base projec- and profitably sell it, versus taking a loss?
willing to purchase. tions of retail meat yields. Be advised that The SARE report entitled Whole Farm
most information is biased toward commod- Planning for the Production of Grass-fed Beef
ity beef, fi nished in a feed lot. Grass-fed gives more perspective on cut selection and
cattle production, for example, may yield how to consider other options for low-value
lower carcass weights with more trimming cuts (see Resources).
required at processing due to less fat, more
The first step is to determine what the
shrinkage during aging of the carcass, and
trimming of unsightly brown areas along average break-even price needs to be.
the edges of a cut’s external surface. Often, Realize that there is a tremendous amount
a few lunch hours with your processor can of shrinkage or loss that occurs along the
provide some insight into typical carcass process. Going from a live animal to a car-
cass results in a 36 to 45 percent reduction
in weight. Processing can lead to another
35 to 42 percent reduction, depending on
how much bone is cut out and how much
shrinkage occurs in the cooler during
aging. Each of those reductions pushes
your break-even price higher and higher.
For example, consider a beef carcass that
yields 350 pounds of retail meat. The calf
and production costs are $800, and pro-
cessing adds another $225, marketing is
$100, and labor and management adds
another $400. A total of $1425 in costs
are spread over 350 pounds of retail prod-
uct. The average break-even price at those
Page 16 ATTRA Beef Marketing Alternatives

17. rates is $4.07 per pound. Every pound of spreads between various cuts on the whole-
meat needs to be sold at $4.07 per pound sale level. A spreadsheet may be used to
to break even. If 140 pounds is sold at develop a retail product list, to plug in cor-
$3.00 per pound (the approximate amount responding wholesale cut price per pound,
of ground beef generated), the remaining and then to apply a traditional retail
210 pounds needs to be sold for at least markup of between 80 to 95 percent of the
$4.78 per pound to generate the same total wholesale price. For example, a wholesale
amount of money. price for IMPS-112A rib of $5.40 would
yield my price for retail rib-eye steaks of
The next step is to establish individual $9.99 per pound (5.40 x 0.85 + 5.40 =
cut prices— the price of rib-eye steak per $9.99 per pound retail, at an 85 percent
pound, the price of ground beef per pound, markup). A packer/processor should be
etc. Do you intend to offer a full slate of able to assist you to identify where retail
retail cuts? Do you have a market for a full cuts are coming from with regard to the
slate of cuts? In many cases, folks are left IMPS boxed beef codes and prices.
holding onto the round steak and various
roasts. If a ready market is unavailable,
consider making those cuts into some other Organic Pricing
value-added product, such as ground beef The steps so far pertain to the commodity beef
patties or fresh beef sausage. Does your level. The next step is to look at the organic
processor have the capabilities to allow beef situation. Many think that there should
you to produce some of these more cus- be an additional mark-up for organic pro-
tomer-friendly products? How about turn- duction. In reality, additional costs incurred
ing the rounds into beef jerky at $12 or due to organic compliance should already be
more per pound? built in. This is why you must know from the
onset what your unit cost of production is.
You can get price spreads for typical
The organic cost should already be included
wholesale cuts from the USDA. It pro-
in the cost to produce a calf. The organic
duces a beef cutout sheet every week that
processing is also incorporated.
indicates prices for various beef primals
or boxed parts are. The price spreads The intrinsic value of organic beef is sub-
between the farm, wholesale, and retail ject to local market conditions, because in
outlets are also available. most instances—especially in larger metro
areas—organic products have a market. In
The three Internet links provided below rural areas, the organic premium, or even
may be useful when pricing your beef. a slight increase in value due to being
The fi rst gives you a feel for where relative farm-raised, might not be possible. This
value is added along the production chain. is where market research comes in. Is the
The second may be useful in establishing intended market ready for organic beef? Is
individual cut prices. The boxed beef cut- the customer base large enough for your
out values help establish traditional price intended production?
Keys to Pricing
Monthly price spreads for meat
www.ers.usda.gov/briefing/foodpricespreads/ Adjust the retail markup on the beef so
meat pricespreads/ that when a total value is calculated for an
individual carcass, the average value per
Weekly boxed beef prices
www.ams.usda.gov/mnreports/LM_XB459.txt
pound is at or above your break-even price
per pound. If the calculated average price
Retail prices per pound is above break-even, then you
www.retail-lmic.info/CD/StandardReports/ have some real profit, but only if you have
BLSTable2.htm truly accounted for labor and management
in your break-even pricing calculation. That
www.attra.ncat.org ATTRA Page 17

18. you may have to tweak the pricing scheme
Paper on carcass breakdown as you gather some of your own data.
www.ansi.okstate.edu/research/1996rr/6.pdf
Once you have a pricing schedule, the next
Another beef breakdown chart question is whether the intended market will
www.beefretail.org/documents/Wholesale%20Pricing%20Chart%2008 purchase beef at those prices. If prices are
2004.pdf
marketable, then proceed with your market-
For assistance identifying cuts and where they come from ing plan. If the calculated prices won’t fly
www.beeffoodservice.com/Cuts/Default.aspx with consumers, then re-evaluate inputs to
reduce prices while you explore other mar-
keting options. Or, accept what you are cur-
profit margin is an important number to rently doing as the best alternative, given
remember as you make changes in the sys- the situation. A move up the food production
tem. Let’s say, for example, a retail grocer chain is not always a guaranteed way to go.
is willing to carry organic meat for 15 per- But by going through a detailed planning
cent of the retail price, and your margin is process, you have better information upon
20 percent. You have room under the exist- which to base a decision.
ing pricing structure to participate without For more pricing information, an Excel
re-pricing all your product. The question spreadsheet based on data from the SARE
becomes, what level of profit are you happy Whole Farm Planning Project is avail-
with, and when does it become necessary able to create a retail pricing chart. The
to adjust prices? spreadsheet uses traditional price spreads
for various cuts of beef. The spreadsheet
The information from the Carcass Break- allows you to use your own cut data, deter-
down paper (see box above) helps determine mine retail mark-up, and calculate an
average total carcass values from the aver- estimate of total retail value for a carcass.
age weights for each cut as a percent of the This planning tool can be used to develop
carcass. Another method is to conduct cut- retail prices, determine profit or loss per
outs on some of your own carcasses to see carcass, and calculate various product
what the actual retail yield for various cuts line-up scenarios prior to putting a car-
cass in the box.
might be and use those figures to calculate
the price. Of course, real data on your own
cattle, with your processor, yields the best Conclusion
results. If you use the research report data, Shortcomings of the conventional marketing
system have made the time ripe to return
to marketing beef directly from ranches to
consumers. Niche marketing can sometimes
give the farmer a larger share of the food
dollar and a higher return on each unit sold.
Adding value or marketing some minimally
processed farm products directly to the con-
sumer may be a way to enhance fi nancial
viability. While successful direct marketing
may or may not increase profits, it will pro-
vide protection from fluctuating live-mar-
ket prices. However, direct marketing is a
labor-intensive job, demanding time, effort,
creativity, ingenuity, sales expertise, and
the ability to deal with people in a pleas-
ant and positive manner. Producers must be
absolutely sure they are ready for the job.
Page 18 ATTRA Beef Marketing Alternatives