We Live in a Discount World

October 15, 2018 08:10 AM
 
Value-added programs don’t necessarily add value to a set baseline price. Rather, they begin by removing some of the discount (risk) that buyers assume exist.

What can I do to get more for my calves? I believe the best way to answer this question is to explain it from the perspective of the buyer. Recently, I spent a few days visiting with feedyard managers, cattle procurement specialists and fat-cattle buyers. I had the following ideology reiterated to me on many occasions: The beef industry is based on discounts more than anything else. 

Value-added programs don’t necessarily add value to a set baseline price. Rather, they begin by removing some of the discount (risk) that they assume exists. Think of it as starting in a hole and working your way out. Health, evenness and flesh are at the core of those things that tend to draw the largest barrage of initial discounts and must be overcome before moving into the next layer of value addition.

You think to yourself, “I vaccinate every year, and I’m not sure I ever get paid for it.”

Maybe you are, and you just don’t know it. Proper vaccination protocols along with documentation are valuable. Not having a reputation for health-risk cattle is a tremendous discount to remove from your program. Cattle feeders remember most good groups of cattle they feed.  However, I guarantee you, they will definitely remember all the bad ones.

Next, tighten up those calving windows.  Cattle procurement specialists need to buy cattle 50,000 lb. at a time to be efficient with trucking costs. Selling in semi-load groups might be one of the largest discounts that can be removed.  Additionally, groups that are very even for size, type and quality require little to no sort upon arrival. Therefore, they have the potential to fed as an intact group: same pen, same ration, same number of days on feed and same harvest date. Sorting, days on feed and other logistical items that need to be managed require time and labor. Those have a cost in the feedyard, the same as they do on your ranch. 

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One of the more common discountable issues that can plague feeder cattle owners is getting cattle too fleshy. 

Feeders simply aren’t going to pay for the “loss-of-production” risk those cattle represent. Overly fleshed cattle generally suffer excessive shrink and go “backward” for a time before they start growing again.  This can also increase their percent probability of a stress-related health incident. 

Last, cattle that are set up to achieve more value for the buyer when they become the seller will be far more valuable than those that could or might achieve premiums. Words like “could” and “might” should be synonymous with “risk” or “discount.” The demand for program cattle is very strong and tends to be some of the first words uttered by managers and buyers. They want program cattle! 

Program cattle have the extra layers of value and pull-through demand to make them highly sought after. In a sense, they go that extra mile in helping you separate from the commodity pack and reach the pricing summit. Top Dollar Angus, Red Angus FCCP, NHTC, Certified Natural and
GAP 4 are all examples of the highest demanded programs. I hate to leave you hanging, but next month, we will take a more in-depth look at programs and why they need to be on your marketing radar. 

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