Transcript Specialty and Innovative Livestock Markets

Specialty and Innovative
Livestock Markets
Presented at the Southern
Region Ag. Outlook
Conference, Tunica, MS.
Sept. 23-25, 2002
Lee Meyer
Extension Professor
Dept. of Ag. Econ.
Univ. of Kentucky
Specialty and Innovative Livestock Markets
Objectives/Plan:
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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?
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Mainstream livestock & meat product;
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Exploit some kind of opportunity;
A different twist –
entrepreneurial;
 Most have a mix of unique aspects.
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Why, what has changed?
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CONSUMERS!
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Health, convenience, wealth
Commodities out, customized products
in;
 Communications technologies;
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eg. Internet,e-mail, etc.
 Behavior
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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
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Why Classify Attributes?
Marketing means giving buyers what
they want – so understanding
attributes helps this process
 Markets are structured to deliver
and price products
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Structure must take types of attributes
into account
Attributes Hidden vs.
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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
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Feeder cattle & retained ownership
Attributes Hidden vs.
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Feeder calf vaccines
Calf genetics/sire
Pork health program
Cattle feed program
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Visible
Feeder calf condition
Calf color
CAB – black, Choice
Attributes Direct vs.
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Indirect
The system has been focused on
what is IN the product, but there
is an increasing interest in the
history of the product
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Organic products
Attributes Direct vs.
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Meat tenderness
Meat lean/fat
Juiciness
Indirect
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Humane standards
Environmental
stewardship
Antibiotic use
Attributes
– Capturing Their Value
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Hidden
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Search costs
Alliances and new
generation
cooperatives
reputation
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Indirect
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Certification
programs
Direct markets
Reputation
Other Dimensions 
Increasing Competitiveness
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Merchandising
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Instrument Assessment
#1 - Pricing by Attribute
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Grid marketing
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U.S Premium Beef - Producers earn
increased returns based on
attributes of grade, yield
Certification Programs
Ky CPH-45
 “Free Farmed”
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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.
www.freefarmed.org
A certification mark of
Farm Animal Services
#2 Increasing Competition
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Using communications technologies
to bring in more buyers
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Reducing transactions costs with
communication and also cooperative
efforts
Atkinson Livestock Market
Atkinson, NE
Mobridge Livestock Auction
Mobridge, SD
Live Video on Thursdays
Bassett Livestock Market
Bassett, NE
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#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.
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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
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Ranchers Renaissance/ Excel/
Kroger alliance
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Process verified product
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Advanced measuring
• In cooperation w/ eMerge
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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
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Direct/Local Marketing
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Green River Cattle Company
Research approach
• Cost of production
• Market research – value of “local”
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Smaller scale innovations
Needed Support Systems
Technical Help
 Business Assistance
 Market Environment
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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
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i.e. “rules of the game”
 Need for research
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Integrating help
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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” …
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What is the Future?
Expansion of certification systems
 More “branded” products
 Loss of commodity markets
 More proprietary information
 Use of measuring technologies
 ??
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The CHALLENGE
[email protected]
Implications for LGUs