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Agricultural Research North Dakota State University, Fargo, ND 58105
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Entrance Strategies for Value-Added Cattle
Production in the Northern Plains (continued) |
 Conclusions and Implications of this ResearchThe recent effort to develop a farmer-owned cooperative packing plant has been an important step for the livestock industry in the Northern Plains. It appears producers are not yet ready to make a major investment in limited-use facilities. Yet, it is clear the region's cattle producers want to explore opportunities to move further down the value chain in their industry. The alternatives they pursue will depend on their goals, but may include increased economic activity in the Northern Plains area, as well as elsewhere. Ultimately, cattle producers will want to consider being involved in selling a branded beef product. To enter the branded product market does not require capital investment in either feedlots or slaughter plants. Leasing facilities, custom feeding, and custom slaughter are viable alternatives to ownership of facilities. Perhaps the time is right for Northern Plains cattle producers to initially by-pass "brick and mortar" investment and, instead focus on building a profitable market in branded beef products. If that step proves successful, cattle producers can add ownership of facilities at a later date. A three step process makes economic sense. First, build upon the comparative advantage of Northern Plains producers. That comparative advantage is an ample supply of high quality cattle and readily available feedstuffs to support backgrounding those cattle. This advantage can be further leveraged by focused efforts at improving the genetic performance, uniformity, and quality of the cattle produced. Important industry experience can be gained by increased backgrounding and by preferred supplier relationships with Central Plains cattle feedlots. Second, producers should investigate forming a marketing cooperative to market the beef produced, fed, and slaughtered under their value-added initiatives. This firm should focus on marketing a branded product through retail outlets nationwide, although perhaps starting with one major regional supermarket chain. An important focus will be to build brand identity and to retain control of that brand. Profit margins in wholesale and retail marketing are potentially much wider than in any single intermediate step between the ranch gate and the retail counter. Third, as the ranchers and their marketing cooperative gain production, feeding, slaughter, and marketing experience, they will be in a position to identify the most profitable steps in the system and to leverage their further involvement and growth in those steps. That may, or may not, involve finishing and slaughtering cattle on the Northern Plains. It will, however, involve identifying and exploiting profitable value added markets for Northern Plains produced cattle in both the U. S. and export markets. These steps can be started as soon as the leadership of the Northern Plains cattle industry is ready to move it forward. Agreement on goals and an organizational structure to carry those goals forward is required. The second step requires marketing skill to identify and build on niche markets, domestically and abroad. While this process requires up front capital investment, it is not nearly as demanding of capital as the third phase. Finally, by the time marketing success has been achieved and brand equity is being earned with an array of branded beef products, ranchers will have gained not only marketing experience, but also operational intelligence on cattle feeding and beef packing that will enable them to reach sound decisions on their role in additional integration of the beef industry. We believe Northern Plains producers can and should move promptly and aggressively in implementing this or similar strategies for creating and capturing new value for producers in the beef industry.
Department of Commerce. Census of Manufacturers. Economics and Statistics Administration, Bureau of Census, Concentration Ratios in Manufacturing, Food and Kindred Products, meat packing plants, 1992. Duncan, M.R., R.D. Taylor, D.M. Saxowsky and W.W. Koo. "Economic Feasibility of the Cattle Feeding Industry in the Northern Plains and Western Lakes States." Department of Agricultural Economics, North Dakota State University, Agricultural Economics Report No. 370, March 1997. Also available at http://agecon.lib.umn.edu/ndsu/aer370.html Economics and Statistics System, United States Department of Agriculture, Price Spreads for Beef and Pork (900006), beefsprd at http://www. mannlib.cornell.edu/data-sets/livestock/. Gardner, J. "Beef Co-op Proposal Put on Shelf, For Now." The Forum, Fargo, ND, Saturday, May 17, 1997, p. A8. NASS (National Agriculture Statistics Service), United States Department of Agriculture at http://www.usda.gov/nass/graphics/data/priceca.txt. North Dakota Farm and Ranch Business Management. Annual Report 1996. North Dakota State Board for Vocational and Technical Education, Bismarck, ND.
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