Specialty and Innovative Livestock Markets. Lee Meyer Extension Professor Dept. 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:.
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Specialty and Innovative Livestock Markets Lee Meyer Extension Professor Dept. 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;
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
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 - Hidden vs. Visible
Feeder calf vaccines Calf genetics/sire Pork health program Cattle feed program Feeder calf condition Calf color CAB – black, Choice Attributes - Hidden vs. Visible
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 - Direct vs. Indirect
Meat tenderness Meat lean/fat Juiciness Humane standards Environmental stewardship Antibiotic use Attributes - Direct vs. Indirect
Hidden Search costs Alliances and new generation cooperatives reputation Indirect Certification programs Direct markets Reputation Attributes – Capturing Their Value
Increasing Competitiveness Merchandising Instrument Assessment Other Dimensions -
#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
Livestock Auction Markets 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 57402-1827 Regular Auction Held Every Monday! Owners:Jim and Peggy ThorpeRes.: 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.
Complete Trim USDA Prime Magnificent Tenderloin Filet and Stuffed Filet Mignons 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 CHALLENGE Lmeyer@uky.edu