Nalivka: Marketing Versus Selling Your Calves and Feeder Cattle
We can all agree the cow-calf business is branded with market volatility. While the current market upside is welcome and will give ranchers some breathing room to “beef up” their operating margin, now is the time to shift gears toward capturing the value you have worked hard to create by developing a solid marketing program that will reward you, your family, and your ranch.
The market advantages of building solid genetics in your herd are numerous. We all know that. But, capturing the value that has been created is a different issue. I have written and stated this numerous times over the years - capturing the value created from your investment in genetics that make a difference further up the supply chain is the goal. This is a market based on genetic potential rather than just selling cattle and hoping to generate a positive operating margin.
Last year, the Red Angus Association sent a survey to selected ranchers, backgrounders, auction operators, feedlots, and market economists. I was asked to complete the survey. The purpose of the survey was to gain insight into respondent’s opinion on feeder cattle prices based on hide color versus the genetic potential of those same cattle. Overwhelmingly, the results revealed that feeder cattle should be valued on their genetic potential regarding feedlot performance and carcass performance. And while the survey results presented this data, the results should not be construed as a negative indictment of the Black Angus cattle or the CAB program, but rather the opportunity to move forward in the pricing arena and quantify the value of genetics which have a huge impact on performance. Consequently, the group is now assembling a Task Force with participants across breeds, genetic companies, nutrition companies and others to consider and evaluate opportunities to capture genetic potential in the feeder cattle market. In addition to the Task Force participants, state cattle associations are being approached to support the effort. I was asked to serve on that Task Force as one of two market economists.
Information and initiatives gained through the Task Force will be important to the industry’s future. This is THE stepping stone from selling your calves to marketing your calves and capturing their genetic potential. The potential opportunity for the entire industry - producers, feedlots, packers – that this effort represents cannot be overstated. Capturing the value of those genetics in the beef herd is key to positive operating margins on the ranch, feedlot performance, carcass performance, and last but not least, building consumer demand with quality U.S. beef.
So, now is the time to look toward a data-driven market program supported by data driven economic decisions on the ranch. The payoff – a positive operating margin driven by your hard work and decisions rather than just ups and downs of the cattle cycle.
John Nalivka is president of Sterling Marketing, Inc., Vale Oregon.
