Facing tight margins, many producers may be considering marketing alternatives like selling directly to consumers, said Courtney Bir, Oklahoma State University agricultural economist, in an Extension letter called Cow-Calf Corner.
When selling directly to consumers, producers are marketing beef, not selling cattle, Bir said. This adds complexities to the cow/calf or stocker operation. Plus, the consumer may have certain expectations or preferences for the beef consumed by their family.
THINGS TO CONSIDER
One of the first steps when considering direct-to-consumer beef sales is understanding the different types of meat inspection, she said. Custom exempt may be the easiest option to start with.
Under custom exempt processing, the animal is not processed under any form of inspection and cannot be sold as individual cuts, Bir said. This meat can only be consumed by the buyer of the live animal and non-paying guests, which is why the packaging is marked “not for resale.” The producer would be selling the live animal to the end consumer.
But there may be multiple buyers, for example- four families each purchasing one quarter, she said. The producer may even take the sold animal to the processor for the buyer, where the consumer works with the processor on filling out the carcass breakdown instructions.
It may be advantageous to be familiar with the processor’s habits, as consumers may reach out with questions before making their purchase, Bir said.
Since the producer must sell custom exempt on a per-head or live-weight basis it is easier to determine costs and add an appropriate profit margin, she said. Additionally, producers are only selling a whole animal or shares of the animal in comparison to selling many individual cuts of meat.
PLANT CONSIDERATIONS
State inspected plants have an ODAFF inspector performing pre- and post-mortem inspections of the animal/carcass, allowing producers to sell individual cuts of meat within Oklahoma, Bir said.
But under federal (USDA) or Talmadge Aiken Act (USDA/ODAFF partnership) inspection, products can be sold across state lines and maybe internationally (requires additional global certification), she said. Selling individual cuts of meat may require additional freezer space, or a location where consumers can shop.
Other options would include a subscription service or online sales, Bir said.
It can be difficult to price several individual cuts of meat, knowing there is a relationship in price (for example hamburger tends to be cheaper than steaks) while trying to attract customers and ensure a profit, she said. But in general, direct-to-consumer meat sales can be a good option for some producers.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $192.15 per cwt to $200.07, compared with last week’s range of $190.00 to $198.30 per cwt. FOB dressed steers, and heifers went for $299.79 per cwt to $304.81, compared with $295.27 to $308.27.
The USDA choice cutout Thursday was down $0.55 per cwt at $329.84 while select was down $2.10 at $304.38. The choice/select spread widened to $25.46 from $23.91 with 89 loads of fabricated product and 17 loads of trimmings and grinds sold into the spot market.
The weighted average USDA listed wholesale price for fresh 90% lean beef was $375.67 per cwt, and 50% beef was $100.43.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.55 to $1.65 a bushel over the Sep corn contract, which settled at $4.05 1/2 a bushel, down $0.02 1/2.
The CME Feeder Cattle Index for the seven days ended Tuesday was $256.44 per cwt, down $1.14. This compares with Wednesday’s Aug contract settlement of $263.37, up $2.27.