1. Agricultural Marketing
ECON 337:
Agricultural Marketing
Lee Schulz
Assistant Professor 1

2. Direct Meat Marketing

3. Overview of US Beef System
Cow-calf Operations
Sell stocker calves
Backgrounding / Stocker
Sell feeder cattle
Feedlots / Finishing
Sell slaughter cattle
Packing Plant / Slaughter
Sell boxed beef
Retail / Restaurant

4. Background Livestock system is complex and very segmented
Expenses at each level, transportation costs, communication, etc.
Is there a way to market directly to end users?
Sure, some are doing that

5. Initial Thoughts
You don’t eliminate the middle-person, you become the middle-personal
Logistics
Sales, transportation, packaging, logistics, etc.
Must be customer / market driven
Price takers beware
Consider liability

6. Consumer Willingness-to-Pay
A few studies have focused on willingness to pay for local meat products
Results suggest 15-20% of consumers will pay 10-20% premiums for local products
Local is not enough – package of attributes
Consumers show little willingness to go “out of their way”

7. Typical Challenges Processing costs
Finding a market for lower end cuts
E.g., ground beef and roasts
Moving (pricing) cuts proportional to carcass yields
Meeting consistent quantity and quality requirements
Farmers typically aren’t comfortable as sales people

8. IA’s Processing Ability
IA has many small processors who can provide custom processing service
Advantages
Process to individual request, longer aging time, much closer
Disadvantages
All process a bit different, very expensive – smaller scale, no offal market, etc.
Direct marketers are typically working through these processors

9. Types of Processors USDA inspected Custom Exempt
Inspector present at slaughter, drops in at other times
Allows for meat to be sold into other markets
Custom Exempt
Provide custom service to individuals
Can be used when selling large quantities to individuals

10. The Role of the Processor
A processor partner is crucial
Provide slaughter and custom processing services
Ensure food safety and sanitation
Other services
-Labeling -aging
-Packaging -logistics?
-value added products
Often a major contact point for customers

11. Labeling Requirements
A label for resale must include many items
Name of product, weight, inspection seal, etc.
Most plants have a generic label - likely with their name
Producers can get their own label
Generic approval – no claims, OK’d by inspector
Called sketch approval
If claims are made, process is a bit more difficult

12. Labeling Claims
Many terms have specific meaning when used on a label – lean, natural, low fat, etc.
Claims must be verified at producer expense to be used
Location is considered a claim

13. Some Rules of Thumb Dressing Percentage = 60%-64%
Cut yield = 55% to 75%
Greatly depends on how cutting method
1200 lb steer
744 lbs hanging weight (1200 x 62%)
483 lbs of actual meat (744 x 65%)

14. Direct to Consumer Markets
Sides and quarters
Farmer’s Markets
On-farm retail
CSA’s (Community Supported Agriculture)

15. Sides and Quarters Often called freezer beef Easiest, very effective
Customer buys whole, half, etc. of carcass
USDA inspection may not be required
Sell live animal to consumer
Cuts move in “per head” proportions
Labeling is not needed
Customer is accustomed to retail prices

16. Sides and Quarters Challenges
Large amount of meat
Big expense for many
Many homes don’t have a deep freeze
Must arrange for delivery, pickup, etc.

17. Farmer’s Market Growing market Usually works with freezer / fridge
Customers not overly price sensitive
Product must be labeled for retail resale
Pricing must ensure proportional cut sales

18. On-farm Retail Can be incorporated with agritourism
Customers not overly price sensitive
Product must be labeled for retail resale
Pricing must ensure proportional cut sales
Must get consumer to come to you
Extra stop = extra cost

19. CSA’s Not near as common, but growing
Customer buys share of farm output
Risk sharing arrangement for direct marketing
Money can be received up front
Builds a link between consumers and the farm
Newsletters, harvest festivals, etc.

20. Restaurants Difficult to get “direct to consumer” return
Restaurants accustomed to wholesale price
A level of professionalism expected
Excellent opportunity for “middle meats”
Lower end meats may be challenge
Take samples, follow-up, ask about featuring
Want something different, used to sales prof.

21. Retailers Excellent volume potential for all cuts Limited flexibility
May be able to take carcass proportions
If not, pricing challenge
Limited flexibility
Year round supply probably needed, less ability to feature

22. Successful Direct Marketers…
Are people persons
Are sales and service oriented
Have a strong market for lower value cuts of meat (roasts and hamburger)
Know their costs of production
Plan for marketing before they produce

23. Class web site: