| Selling directly
to the consumer may
significantly increase profits and prices above those received in
conventional
markets. Small-scale operators and part-time producers, in particular,
have the opportunity to market additional services or special aspects
of
their product and realize significant price premiums.
Advantages
of Direct Marketing
The following
discussion covers some
advantages of this practice in relation to other selling methods.
Potential
for increased costs and other considerations are discussed under other
headings.
Higher prices for
small groups
By selling directly
to the consumer,
the producer sets the price and doesn’t experience the price
discrimination
generally encountered when selling small groups of animals. In
contrast,
most packers/buyers want large enough groups of livestock to pay costs
of buying and trucking the animals; they are unlikely to make a trip to
the farm to offer a bid on three or four steers. |
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Even in auction
markets,
small groups of livestock tend to bring lower prices. High prices for
leaner and lighter weight
animals
Small -scale
producers can market animals
to their own specifications without the large discounts experienced in
markets involving packers/buyers. This may allow the producer to
purchase
and feed the smaller framed breeds. In conventional markets, for
example,
a steer weighing under 1,000 pounds may have been fed well and properly
finished but bring as much as $5 per hundredweight less than a
similarly
finished steer weighing 1,200 pounds. However, in many localities,
families
prefer to buy the leaner and lighter animal fed in their area.
More net profit
A combination of
higher selling prices,
no sales company or buyer commissions, and lower purchase prices can
help
improve profitability. Small-scale livestock producers often have
distinct
disadvantages in production costs. Their fixed costs generally are
spread
over fewer animals, and feed costs tend to be higher because current
technology
is not used to the extent that large producers use it. When selling
directly
to consumers, producers may set their selling price at a level that
ensures
profitability (if they know their production costs).
Better cash flow
By setting their
own price and standards
for the number fed and sold, market weight, and amount of finish,
producers
may know the market price prior to selling and perhaps even prior to
purchasing
or producing the feeder animals Marketing can coincide with cash needs
(such as taxes) or accommodate a year-around schedule without the
seasonal
price fluctuations normally experienced in other marketing situations.
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Deciding
What Products to Sell
Consider the
following factors when making
a decision on what you will sell and how you will sell to your
customer.
Sides (half
carcasses)
This is the most
common and generally
the most appealing way for you to sell beef (whole carcasses in the
case
of pork or lamb).
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However, a decreasing number of consumers can buy a
side
or even a quarter of beef at one time. Increasingly, families lack
freezer
storage for large quantities of frozen meat. Current trends indicate
that
people are eating out more often and preparing fewer meals at home,
especially
meals such as roasts that require long preparation times. Offering
lighter
weight animals and wrapping cuts in smaller packages sometimes overcome
these objections.
Quarters
Rather than selling
individual front
and hind quarters, some producers use a practice known as splitting
sides.
It involves an even division of steaks and roasts from the entire side.
The conventional method of selling fronts and hinds often results in an
excess of front quarters no matter how inexpensively they are sold;
grinding
excess front quarters for hamburger can be a better alternative.
Bundles
In some areas,
consumers find bundles
are a good alternative to sides. They get a variety of cuts of uniform
quality at an attractive price and have a smaller total cash outlay.
Types
of bundles could include (a) an economy pack that has most of its cuts
from the chuck and round to provide more roasts than steaks or (b) a
deluxe
bundle that has most of its cuts from the loin and rib to provide more
steaks than roasts. You and your meat cutter may need to experiment a
while
to find the feasibility, sizes, types and prices of bundles that
generate
uniform sales volume for all part of the carcass.
Specialty products
A profitable direct
marketing option
could be the processing and selling of a specialty product. This might
be nothing more than selling cull cows as hamburger or selling cull
sows
as whole hog sausage, or developing a special recipe for lamb bologna
using
cull ewes. This approach might be taken in conjunction with a more
conventional
approach of selling sides and quarters.
Specialty products
sometimes sell well
at farmers’ markets, especially after a reputation has been
developed.
In some cases, the entire production has been successfully marketed
with
this approach
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