Niche Beef Production and Marketing in Colorado

The western cattle ranching business has faced many challenges throughout its turbulent history, including recurring drought, predators, invasive plants, animal diseases, increasing input costs and a decreasing market share to other meats. Ranching is a resilient business. Today, however, it confronts a fundamental change that is eroding the very foundation of the ranching enterprise – a rapidly shrinking land base.

Forty-nine percent of Colorado’s land, or 84 percent of all private land, is managed by farmers and ranchers, for a total of 32.6 million acres (U.S. Census of Agriculture, 1997). The USDA/NRCS National Resources Inventory provides a historical perspective on changes in the agricultural land base. From 1982 to 1997, 332,200 acres of farm and ranch land have been converted to development in Colorado (NRI, 1997). Pasture and rangeland made up 67 percent of all land converted. Geographic information systems analysis shows that another 2.6 million acres of ranchland in Colorado are currently threatened by residential development (AFT, TNC and CAW, 2001). A primary force driving agricultural land conversion is Colorado’s 2.7 percent annual population growth rate which has led to an annual land consumption rate of 8.3 percent (Sullins, Theobald, Burgess and Jones, 2000).1

There are three fundamental ways of protecting agricultural land from conversion to other uses: 1) direct land protection via mechanisms such as conservation easements; 2) public education aimed at increasing awareness about the many values that agricultural lands provide to local communities; and 3) economic development strategies for agricultural businesses. American Farmland Trust (AFT) has been involved in protecting Colorado’s agricultural land since 1982 (AFT currently holds easements on approximately 13,000 acres), and in public education and policy development in communities across the state since 1997. Over the past years, AFT has witnessed the tremendous growth that threatens Colorado’s remaining farm and ranch land. Many producers are driven to leave agriculture by declining business profitability, but there are still many who would prefer to find alternatives that allow them to remain in business (AFT, 2000). In fact, during the Western SARE-funded train-the-trainer workshops that AFT conducted in Idaho and Utah in 2000, workshop participants indicated that information about agricultural business issues and opportunities should be included in all discussions about land use and agricultural land protection.2

While land use and demographic changes have made some agricultural operations more difficult and less profitable, they have also opened new doors for business development. There are documented success stories of ranchers throughout the Rocky Mountain West who are using innovative strategies to generate income from their existing resources (Sonoran Institute, 2000).
Economic development strategies such as business diversification offer new options to producers confronting the challenges of staying in business in the face of changing market conditions.

One growing area of interest in the ranching business is niche beef marketing. The beef industry is changing, as are consumer preferences. Conventional beef production is very segmented, with meat moving from the producer to the feedlot to the packer (Smith, 2001). One of the most important implications of this is that the quality of meat reaching the consumer can be quite variable. Consistent quality (in terms of taste, tenderness and safety) is very important to today’s consumer. In addition, as consumers have become more interested in and informed about how their meat is produced, a growing number have also demanded meats with other characteristics such as very low fat content or hormone- and antibiotic-free production (Grannis and Thilmany, 2000). Growing demand for these characteristics has created the possibility for producers to market to specific consumer segments.

Niche marketing entails identifying and marketing to a population segment that is dissatisfied with conventionally produced beef and willing to pay more for a product they consider superior. In fact, a survey conducted by Colorado State University’s Department of Agricultural and Resource Economics found that consumers would pay a 20 percent a premium for natural steak and ground round (Grannis and Thilmany, 2000). Ranchers involved in niche production add value to their beef by differentiating it from the products traditionally sold in grocery outlets (ATTRA, 2001). This strategy allows producers to diversify their income stream while decreasing their exposure to the market volatility associated with conventional, less vertically integrated production practices (Nader and Blank, 1997). Beef niches include certified organic, natural (no artificial ingredients with minimal processing), grass-fed (little or no grain finishing), locally raised (promotes local business) and conservation-based (animals raised on land protected according to certain stewardship practices).

Many mid-size Colorado beef producers are interested in achieving the benefits of operating a branded beef business, however, they are also aware of the complex regulatory environment, the changes necessary to existing production practices to provide a consistent quantity and quality of desired beef product to customers, the difficulty in finding a reliable processing facility, and the costs of product labeling and marketing. Many of these businesses struggle with marketing and financial planning to ascertain whether niche marketing will provide enough reward to justify the extra labor and capital commitments involved in such a business enterprise. They are also in need of a decision framework to make pricing decisions for their products that will help them achieve that reward level. There are several niche-oriented beef operations in Colorado. They include Lasater Grasslands Beef (national marketing of hormone- and antibiotic-free beef, raised under humane conditions), Yampa Valley Beef (local marketing of beef grown on agricultural land protected by conservation easements), James Ranch Agriprises (grassfed beef raised on holistically managed land), San Juan Organix (organic beef raised on holistically managed land), Rocky Mountain Beef (marketed locally as contributing to the protection of agricultural land and open space on Colorado’s Western Slope), and Colorado Homestead Ranches (a group of five families marketing beef through their retail store in Paonia). Each of these enterprises focuses on a distinct attribute and distribution area that allows differentiation from other beef products. The coexistence of these successful operations illustrates that there are still markets for beef whose production processes differ from conventional ones.

There are many good sources of summary information on producing beef outside of conventional markets. For example, many university Cooperative Extension Services have published fact sheets on beef marketing (Colorado State University, University of Idaho and Oklahoma State University, among others). Appropriate Technology Transfer for Rural Areas has published two excellent technical notes on alternative meat production and marketing. There is also more general information on agricultural diversification and marketing, such as the University of Nebraska’s workshop series based on, "Promoting Agriculture’s Future – Ag-Entrepreneurism with Brand U Products," and a series of SARE-funded workshops in Wyoming currently exploring agricultural enterprise diversification.

Currently lacking, however, is a step-by-step, in-depth source of information and training for professionals working directly with ranchers on niche beef issues in Colorado and the western region. The production, processing, marketing and retail requirements for niche beef businesses are extremely different from other commodities. Adding value by retaining more control over aspects of the production process is very complex, requiring new management skills and resources, as well as specialized knowledge. Furthermore, there is a lot of hard-won experience among livestock producers who succeeded or tried to establish niche-oriented operations, but no forum through which this information and expertise can be shared. The Western SARE Professional Development Program provides an excellent opportunity to assemble this information and formally train agricultural professionals in an area of growing importance to ranchers and to rural communities.

This project has enabled agricultural professionals and ranchers to come together to learn current practices, understand the regulatory environment and share lessons learned in developing and operating niche beef businesses. It also has built upon previous educational efforts, by AFT and other organizations, to increase the range of options available to agricultural producers to remain in production, keep their businesses viable and protect the land base.