Just a few short years ago, alliance, value-added health program and marketing cooperatives opened the door to better marketing alternatives. Today, they still provide a potential for premiums above the cash market. Now, throw that door open wider and add verification programs as a way to gain greater market value.
“There’s been discussion of a two-tiered marketing system in this country for a long time now,” says John P. Stevenson, director of the Kentucky Beef Network. “For whatever reason, people thought it was going to be based on carcass information. But I feel that this might be it, that source verification becomes one of the marketing tiers.” The other tier would include cattle without additional value or information.
Right now, discussion seems to focus more on the national animal-identification program and what the parameters might be, including whether it becomes mandatory. But for many, just identifying an animal is one thing, but the ability to create an auditable traceback system has merit beyond the scope of animal-health surveillance.
Age- and source-verification programs continue to gain momentum, especially with talk over Japan opening beef trade again. The government has already stated it wants animals less than 20 months of age. USDA’s A70 physiological maturity measurement in the cooler or age verification through auditable production records showing birth dates will work to meet this requirement once trade resumes.
Packers aren’t waiting for Japan to announce trade resumption. Instead, many are already
lining up cattle sources that can meet the age-verification requirement.
Open door to market access
“The demand (for verification programs) is coming from the buyers,” Mr. Stevenson says. Producers are interested, as well, for the additional market opportunities. “You need to be part of some organized effort to have load lots to capture the values of these types of things. Buyers are pushing it and producers are reacting.
“In the last year, we’ve incorporated age and source verification into some of our preconditioning sales,” he says. “Compared to what we saw last fall, it appears there is substantial demand for age and source verification.” The Kentucky Beef Network helps Kentucky producers gain more value for their cattle by offering certified preconditioning programs and special sales. In addition, it is now part of the Southeastern Livestock Network, which was organized in June by 10 cattlemen’s associations in Alabama, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia and West Virginia.
The goal was to provide a pilot program for the animal-ID program, but it has expanded to provide source verification and market-information services, as well as cow-calf records management that ranges from birth to weaning to carcass data. The hope is that information gathered can provide average benchmarks for producers to compare their production to that of others. The benefit from that data collection and use should help open doors for producers in the Southeast to market their cattle for a better price to offset the cost of an ID program.
Another verification program is helping to open marketing doors for producers in Kansas. Agriculture Solutions, a division of the Kansas Farm Bureau, helps producers connect to a confidential database with the ability to provide source and age verification. Producers participating can then use their own ranch data to make management and marketing decisions. As a benefit to producers, several data-management and verification centers across the state will help producers access RFID tags and/or input data from manually recorded cattle records.
Opening premium possibilities
Who wouldn’t like to see a $10-per-head premium? As one example, under the Sterling Solutions program with E.A. Miller, participants can receive a $10-per-head premium on cattle that are age- and source-verified. For cattle with only source verification, the premium is $7. Cattle going through the program must go through a certified ranch and certified feedyard that is in compliance and operates within the bounds of the program.
“We’re dividing that money, then, according the length of time the cattle were owned by anyone in the supply change,” explains John Nalivka, president of Sterling Marketing and principal in Sterling Solutions, a beef source-verification and traceback program. The program maintains segre-gation of the cattle from the ranch to the packer, which allows it to be one of the few programs that meet the requirements of USDA’s Process Verified program.
Simplot Land & Livestock Group, one of the top 10 suppliers of cattle in the United States involved in all aspects of beef production, is one of the cattle operations certified in the Sterling Solutions program. The group believes that verification programs provide a growing marketing opportunity.
“We feel that the market right now, especially the export market, that the source- and age-verified cattle are going to be very profitable,” says Ramona Ridley, administrator at Simplot in Grand View, Idaho. In addition to age verification, she says that the market situation could change beyond just export opportunities — that source verification might help consumers feel more secure about the food chain. That, in turn, would create more value and demand for source-verified cattle.
Ms. Ridley says that participation in these programs require some additional paperwork and time, but the premium on the end more than pays for that. They view it as a cost of doing business as they put more of their ranch cattle and feedyards into the source-verified program.
“From a strictly marketing standpoint, identification and source verification are going to be a key part of this industry,” Mr. Nalivka says. “Once you get these programs in place, you remove a lot of the liability because there is no question on the source of the cattle. It’s going to change the industry because it is going to be more focused toward a marketing goal and aligning cattle with a market. When you do that, you take a lot of these fringe issues out of the way and you start to move the industry toward meeting that goal.” The goal is providing retailers and consumers with a product they want and expect.