Marketing Opportunities Available To Oklahoma Beef Cattle Producers
11/03/2009 10:00AM
Bookmark
Subscribe
Value is created when a product or service is enhanced to meet or exceed the expectations of the consumer consistently. Value-added marketing of cattle has received much attention in recent years. Progressive producers are capitalizing on opportunities to increase income by securing a better price for calves that have added value. Value may be in the form of weaning, various management practices implemented to improve health and performance, source and age verification, documented genetics, and (or) documented production practices such as “natural” or “organic.” Documentation of the value-enhancing characteristics is a necessary step in this process. The final step in adding value is to establish or identify a market outlet where the added value is rewarded. The purpose of this Fact Sheet is to identify marketing and management programs, and their specific characteristics intended to increase value of calves produced in Oklahoma and the surrounding region.
OSU’s Value Enhancement Program
The Oklahoma Cooperative Extension Service at Oklahoma State University (OSU) in cooperation with the Oklahoma Cattlemen’s Association recognized the increased interest and participation in value-enhancement marketing strategies for cow-calf producers. However, many producers are unaware and unfamiliar with value added programs available to them. As a result of the challenges facing the Oklahoma beef industry, a Beef Cattle Value Enhancement Specialist was hired at OSU to assist producers in taking advantage of the programs and opportunities available. An interdisciplinary group acts as the advisory committee for the value enhancement program. One of the first tasks identified was developing benchmarks for current participation in value-added programs. Initial results of that research follow.
Value Enhancement Practices
Various market, food safety, and national security issues have resulted in impending opportunities for early adopters to benefit from participating in value-added beef marketing and management programs. Several of these opportunities are briefly described below.
Animal Identification
A traceability system records and transmits information on particular attributes about a food product as it travels through the food supply chain to provide information at any specific point, and trace the food to its source. Livestock identification is the first step in a traceability system for meat and meat products. In an international trade market where agricultural systems and consumers are susceptible to both local and foreign animal diseases, integrating a farm to fork (production, processing, distribution) traceability system into current food safety control measures for all animal products is becoming essential. Consumers want stronger controls and source verification at the retail level, offering industry a unique selling point.
Age and Source Verification
As the Japanese export agreement becomes finalized, age verification and source verification are very likely to be key issues. Likewise, Country-of-Origin-Labeling (COOL) became mandatory March 16, 2009. These two programs will both require a set of verification procedures for cattlemen to follow. The Audit, Review, and Compliance Branch of USDA’s Agricultural Marketing Service (AMS) is proposing to use the same process for both programs, and thus producers can use the same relatively simple procedures to qualify for both programs. These procedures are also the foundations for other niche and branded programs. Producers who are prepared for these systems may have a distinct marketing advantage.
Developments in beef export marketing have resulted in new requirements and opportunities for producers. Source and age verification is the ability for producers to qualify cattle for beef export markets, make other specific claims, and capture any associated premiums.
Source and age verification for beef cattle has two components. Source verification is the ability to trace beef back to the farm or ranch where the cattle were born. Age verification is the ability to determine and verify the age of the animal at any point throughout the production system, including post-harvest. Standards for age verification cannot be met without first meeting the requirements for source verification and your records alone do not qualify cattle to be sold as “source and age verified.” Source and age claims are validated either through a USDA Process Verified Program (PVP) or a USDA Quality System Assessment (QSA) program.
Process Verified Programs (PVP) provide the beef industry the ability to make marketing claims about beef attributes beyond age and source verification, but nearly all PVP’s include age and source verification as part of their program. Other attributes may include specific genetics, feeding practices, animal welfare, environmental production aspects, and other claims otherwise difficult to verify by visual inspection. Quality System Assessment (QSA) defines a type of USDA program with a narrower scope and less complex than PVP programs. USDA developed QSA programs beginning in 2004 primarily to qualify beef for export. The only beef attributes verifiable through a QSA program are age, source, and non-hormone treated cattle. More information is available in Extension Fact Sheet, AGEC-612, "Minding your Cattle P's and Q's: Basic Facts on Source, Age, and other Claim Verification through PVP and QSA Programs" (Raper and Richards 2008).
For participation in a USDA-approved Source and Age Verification Program, producers must be willing to share production records to prove the source and age of the cattle. At the very minimum, producers must be able to prove the first and last calf born in every group of calves marketed. Producers must also be willing to participate in an audit process to verify the birth dates of cattle enrolled in a source and age verification program.
Beef Export Verification
To qualify for export to Japan, beef must comply with the regulations of the Beef Export Verification Program (BEV) for Japan. Producers and processors of any cattle providing beef for the Japanese market must participate in a Quality System Assessment (QSA) program that has been pre-approved by the USDA’s Agricultural Marketing Service. Cattle must have been raised by feedlots, backgrounders, and cowherds that were under a QSA program. Records documenting age of the cattle and signed affidavits by the producer are necessary, but not sufficient.
Genetic Verification
Beef breed associations have taken a proactive role in promoting their particular breed of cattle within the industry. Associations will assist producers by providing services enabling access to source and age verification, process verification, genetics, and management practices. Breed associations also provide marketing assistance to producers in locating and establishing markets for their cattle based on specific genetic characteristics.
Health Management Verification
Improper management practices, particularly prior to marketing of cattle, leads to a high frequency of sickness among calves. These losses negatively impact producer profitability, impacting each and every level of the beef production chain. Preconditioning is a general term referring to management practices occurring around the time of weaning that are associated with improving health and performance of cattle post-weaning. For example, these practices may include vaccination, castration, dehorning, feeding cattle in a bunk, weaning, and deworming.
Most calves are healthy when they leave the ranch, but stress caused by weaning, transportation, change in environment, etc. lowers the level of resistance at the same time exposure to disease is increased. Vaccination programs raise the level of resistance and immunity to viruses and other pathogens before a health issue occurs. Proper vaccines, administered correctly and adequate time allowed for immunity to establish in an environment where stress levels are reduced are critical in a successful health program.
There are several vaccination management programs designed to get calves ready to enter subsequent marketing and production segments of the beef industry after they leave the ranch of origin. These vaccination protocols are designed to help cattle resist disease and address health issues. There are effective immunization programs to fit different management and marketing systems. Programs are available for administration before, during, and after weaning of ranch-raised calves and purchased calves. These immunization protocols will prepare calves for marketing at weaning or after the backgrounding phase.
Production System Verification
The beef industry is currently undergoing a marketing revolution where less beef is being sold as a commodity and more beef is being marketed based on specific characteristics and/or quality. These “branded” beef programs have grown tremendously during the past ten years and are increasingly resulting in price premiums paid to producers who can provide cattle that excel in the given program’s carcass specifications. Two such companies, U.S. Premium Beef and the Iowa Quality Beef Supply Network, reported an average of about $21 per head above the cash market during fiscal year 2004.
Numerous natural beef programs are available to producers to take advantage of the growing demand, each with different production requirements. To qualify for the natural program, producers must not use implants, growth promotants, antibiotics, or feed animal byproducts. It is recommended to contact the “branded” beef program to become familiar with the required practices.
USDA has set national standards that food labeled “organic” must meet. Certified Organic Beef is a fully verifiable production system that collects information on the history of every animal including the breed history, veterinary care, and feed. Furthermore, the cattle must have never received antibiotics, growth-promoting hormones, or been fed animal byproducts and must be born and raised with humane treatment on certified organic pasture. They must also only be fed organic feeds and hays.
Extent of Value-Enhancement Participation
To identify programs in which Oklahoma producers were involved in 2007, various marketing programs were contacted to measure producer participation and number of cattle marketed through value-added efforts. Contacts were made with source and age verification companies approved through USDA, breed associations, feedyards, pharmaceutical companies and livestock markets as reported by USDA/AMS.
In 2007, 85,575 calves were enrolled in a value added marketing program, but this number is likely overstated as some calves may be enrolled in more than one program. For example, a group of calves could participate in a health certification program, but also be enrolled in a breed association alliance, and/or source and age program, then be sold through electronic marketing. Thus, that particular set of calves could be counted four times as participating in a value-added program. This extent of duplication is likely rare. However, in the data collection process, eliminating duplication was not possible.
The 85,575 calves represent a very small percentage of the total number of Oklahoma cattle numbers. With more than two million cows in the state, the total accounts for just 4.3 percent of possible calves (assuming 100 percent calving) available annually for value-enhancement marketing opportunities.
Data indicate that a health certification program is the most used with 31% of the total number of value-added marketing followed with source and age verification, 27%; breed association alliances, 20%; livestock markets’ value-added sales, 6%; and electronic markets, 16%. A summary of the value-enhancement program categories and number of calves enrolled in 2007 is shown in Figure 1. The figure shows the distribution of participation in each program without the elimination of duplicate calves enrolled in multiple programs. Figure 2 shows the venue through which value-added calves were marketed.
A summary of the programs currently available to Oklahoma cattle producers along with services and/or requirements of each value-added program is shown in Table 1. Data presented in the table was provided by representatives of that particular program. As value-added program opportunities may change, we will continue to keep this publication updated electronically at www.beefextension.com.
Source: Doug McKinney, Oklahoma State University