Direct marketing takes some of the sting out of low commodity prices

Direct marketing takes some of the sting out of low commodity prices
by Bonnie Warnyca - 8, 2009

Ralph and Jacqueline Nelson, son Wade and daughter-in-law Jaimie run Highwood Valley Ranch southwest of High River. They began direct marketing a portion of their 250 Black and Red Angus cows about four years ago. "I sold jams and jellies and salsas at the Millerville Farmers Market and noticed sellers of bison and chicken and lamb and saw an opportunity for a beef producer," remembers Jacqueline. "I'm a teacher and passionate about our production story so developing a direct beef sales program was an easy decision. We sell through the farmer's market and have regular customers for bulk purchases off the ranch."

Do you put more work into the front end of the cattle business or the back end? That's a constant debate for the Nelson family. "Other producers might look at our ranch marketing program as small potatoes," admits Ralph. "But Jacquie sells roughly 20,000 lbs of beef or 25 to 30 animals all by herself. Selling a carcass with a significantly greater margin than the commodity market provides makes sense if you can devote the time to marketing. We still sell the majority of our calves into the commodity market but any animals we can sell for this kind of a premium certainly contributes to our sustainability."

The Nelsons consider their ranch a low-cost operation. "We've lived in our area for many years so the higher land prices haven't affected us except that at $3,000 an acre, we can't afford to expand. We have a grazing lease and access to all sorts of feed even this year. Yet, with these things in our favor, we still can't make much of a profit. I don't see things turning around."

Nelson can't understand why some people, including auction markets, get excited when calf prices tick up five cents. He says, "When you pencil out that meager increase it's another $25 on a 500 lb calf or $2500 on 100 calves. We've been so used to taking so little for our product that we've become insulated to the fact that we're not capturing our cost of production, let alone a profit."

"The calves for our beef sales are finished on grass and free choice oats," says Jacqueline. "We grow the oats and we don't want to baby sit these cattle by finishing them the more traditional way with corn or barley. It's just a lot less management and as we get older, that is one of the prerequisites to whatever we do. It takes a bit longer to finish the calves on grass but our customers love the meat."

The Nelsons price their beef higher than market price but because they must pay the processing and SRM disposal costs they need to recover those additional expenses. The direct market sale calves are not implanted and anything that is treated with antibiotics is sent to the commodity herd. Customers want to know where their beef comes from and are willing to pay for the production information and transparency. Processing can be a problem for this type of operation. They are able to process their meat close to home at Foothills Custom Meats in High River, but it's not always easy to get a booking when the cattle are ready.

Ralph says they've gone to a lot of meetings over the years and followed other value chains but the lure of a possible five or ten percent premium just isn't enough to commit their cattle to a particular program. "Locking in production is difficult for the value chains because if producers don't see an immediate premium, they'll try to capture higher prices no matter where they appear. By selling our story, we've been able to value add to our operation. I believe that the high volume/low margins have taken our industry in the wrong direction. We're in our 50s and are still willing to put the work into marketing our beef. But there are many our age that will just get out of the business. "

Now that son Wade and his wife have returned to the ranch, the families need to pencil out whether to add more cows and/or to put more effort into the direct sales. "Initially when we began selling at farmers markets and off the ranch," says Ralph, "Our customer was more of what I would call in a niche category. Now we're selling to the mainstream or to just ordinary Albertans that want to buy beef direct from a producer. This is a part of a much bigger trend of which the "hundred mile diet, and the "locavore" are examples of. People want to reconnect with where their food comes from. We are just learning to look at the landscape in terms of watersheds. Perhaps in the future we will be looking at our food in terms of foodsheds."