Recently, I’ve had the opportunity to speak with reporters about current events in the beef value chain. (You can follow the links that were posted in an earlier post) As I was trying to think about the industry response from an agricultural economics perspective, where value chains are best seen as demand pull chains and consumers are not vilified for attempting to maximize utility, I tweeted out a link to my dissertation. A reporter from Realagriculture.com took the time to skim it and I spoke with her about my findings a week or so ago. You can read the results of that interview here.
One of the main findings of my dissertation was that farms that open lines of communication with downstream firms — this could be backgrounders, feedlots, or consumers depending on the organization of the channel — perceive that their performance is better than other firms in the industry. Now some in the industry see this and immediately think “How can I effectively open lines of communication with consumers about whether my animals are appropriately meeting their needs.” The truth is, an individual farmer probably cannot (and probably should not) do this as the marginal benefit of this endeavor will be quite low and the marginal cost will be quite high. However, the industry groups probably should be doing this on a regular basis; something that was pointed out by Andrew Campbell. I am certain that this communication is already going on to varying degrees across different producer groups and organizations. What would be fantastic is if that information was passed back up the channel to feedlots, backgrounders, and cow-calf operations for them to make use of the information as they see fit. Maybe it is and it just doesn’t get to assistant professors. I don’t know.
The fact that is may not be economical to purposefully open lines of communication with a random consumer does not mean, however, that the upstream firms should not open lines of communication at all. It may mean that it may make more sense — both practically and economically — to open these lines of communication with their immediate customer. The reason being is that when operating in a value chain, the job of the firm to make sure that the products they put through the system help the next firm meet the needs of the next firm’s customer. Really, it is all about helping your customer meet the needs of their customer. So, if we think about that, that means that the job of the cow-calf farmer, from a marketing perspective, is to discover the needs of the feedlot owner/manager, and produce cattle to meet this firm’s need. Just as it is the job of the feedlot manager to produce fed cattle to meet the needs of the packers, and the job of the packer is to meet the needs of the retailers, and the job of the retailers is to meet the needs of the consumer. We can only do that with communication followed by action.
So my question is this: given the industry critique of Earls switching to a U.S. based supplier for its beef (and later backtracking on this) was that Earls did not consult with the industry before making the move, how often does the industry consult with their customers to discover how current supplies are meeting demand? Recent data from the Western Canadian Cow-Calf Survey shows that 80 percent of respondents market calves through an auction. How often does the producer even know who purchased their calves? If they know, how often did the producer contact the purchaser to see how the feeders performed in the feedlot? How many producers are signed up for BIXS so they can use carcass data to make future production decisions? This is all part of value chain communication. If we don’t know who our customer is or how our product performed at the next stage of the chain, how can we be sure the changes we make in breeding programs, grazing management, preconditioning protocols, etc. help the feedlot help their customer?
The future of beef production will likely be more data and market driven than it is today. Demand from consumers for transparency, information, beef with a story, is more likely to grow rather than wane. The question is, are we prepared to meet these needs before they become news stories, or are we happy to react to events as they unfold?