Development of a Rancher Cooperative to Market Grass-Fed Meat

Project Overview

LNC95-078
Project Type: Research and Education
Funds awarded in 1995: $33,300.00
Projected End Date: 12/31/1997
Matching Non-Federal Funds: $20,400.00
Region: North Central
State: Kansas
Project Coordinator:
Dan Nagengast
Kansas Rural Center, Inc

Annual Reports

Information Products

Commodities

  • Agronomic: wheat, grass (misc. perennial), hay
  • Additional Plants: native plants

Practices

  • Animal Production: free-range, pasture fertility, range improvement, grazing - rotational, stockpiled forages, winter forage, feed/forage
  • Education and Training: farmer to farmer, networking, on-farm/ranch research
  • Farm Business Management: new enterprise development, cooperatives, marketing management, agricultural finance, value added
  • Natural Resources/Environment: biodiversity, wildlife
  • Sustainable Communities: analysis of personal/family life, employment opportunities

    Abstract:

    The ranchers involved in this project knew that if we wanted to produce grassfed beef, we would have to create our own marketing system through which to sell it. Nevertheless, none of us had any idea how difficult all this would be.

    Our SARE project objectives were:
    a. Found a Marketing Cooperative or other rancher-controlled business
    b. Develop quality control standards for production of grassfed beef
    c. Conduct market research on grassfed beef with consumers
    d. Explore processing options with small-scale meat processors
    e. Develop a business plan to implement production and marketing program

    First, we reviewed and discussed alternative legal structures such as corporations and partnerships. The ranchers then decided to form a cooperative and adopted articles and bylaws, (fully revised a year later to allow capitalization through marketing rights). We also developed a group process outline for decision-making and resolving conflicts. Internal harmony and cohesion are crucial for us. The co-op model has the advantages of pooling capital, labor and enthusiasm, and with the one-member one-vote provision, equalizing the power of all members regardless of size. In developing our business plan, we ran into huge challenges in the developing skills, procedures and infrastructure to manage what has become a manufacturing and marketing firm.

    We conducted an extensive literature review on grassfed beef production. We decided to conduct our own production “research.” Based on the literature review and our best instincts from personal experiences in grazing cattle in the tallgrass prairie region, we began to produce and market grassfed beef. We have processed and marketed now over 150 head and continue to fine-tune our production model accordingly.

    We tested the beef in a formal large blind taste panel, in our own rancher testing committee, in numerous promotions, and generally in the marketplace–the ultimate “test panel,” and find that grassfed beef is enthusiastically accepted by our certain market niche, and has distinct flavor appeal. However, we had to educate consumers as to how it was different, how to cook it, and its tremendous nutritional advantages. We conducted a Ranch Day inviting customers to come to our ranches to see the land, learn about ranching methods, and meet and form a connection to the people who raise their food.

    We had to process in a federally-approved plant in order to sell out of state, so we explored the few federal plants which would handle small volumes, and then established a relationship with a small plant that did “private label” work for other small specialty meat companies. Our processing costs are very high compared to large-volume producers.

    Related projects have been nutritional testing and obtaining USDA approval of a special claims label. This has been an incredibly complex, time-consuming and expensive, but essential to adding value to our premium-priced product to be able to sell at any profit. Results have shown grassfed beef has such significant nutritional advantages as to constitute nearly a wonder-food.

    Realizing that we are still midstream in our development, basic conclusions we would submit at this point are: (1) it is possible to produce quality grassfed beef that is enthusiastically accepted by a niche market, (2) grassfed meat in general has exciting potential as a nutritionally excellent food source, (3) if producers want to direct market their products, cooperatives are an advantageous way to do it, (4) it may not be realistic to expect success from small producer marketing cooperatives unless (a) a great deal of training and guidance is available all along the way, and (b) adequate capitalization is available, and (5) producers going into such a business must be prepared to make serious commitments affecting work and family life.

    Introduction:

    Ranchers joining together to market grassfed beef reviewed choices of business entities and decided to form a marketing cooperative. They learned team-building and decision-making. They studied literature on grassfed beef production, but found their own trials to be most informative. Their marketing efforts found grassfed beef to be an enthusiastically-accepted product, particularly in the niche of consumer with concerns about health, the environment and animal welfare, although many buy it just for the exceptional taste. The most remarkable discovery has been the terrific nutritional profile of beef raised in this way–very low in fat and high in protein and iron.
    However, the ranchers have had severe difficulties in keeping up with the challenges of developing product, developing a market, handling distribution, accounting, budgeting, inventory, database, etc. The complexities of managing a manufacturing and marketing firm were nearly all new–the beef business is totally different from the cattle business. Capital requirements have been stiff and personal demands on time difficult to bear. Nevertheless, the group has made great progress and attributes much of this to their cooperative model in which a group of committed people working together can accomplish much more than they could by themselves.

    In summary, producing quality grassfed beef is certainly possible and the product has many advantages. However, creating an entirely new functioning market for it has been intensely difficult, but possible through the immense potential of motivated people working cooperatively.

    Project objectives:

    a) To found a marketing cooperative, or other legal rancher-controlled business structure, with a defined group process for decision-making and project implementation.

    b) To develop production standards and carcass grading standards for high quality meat product identified as “grass-fed”

    c) To conduct market research with consumers to determine consumer desires in a grass-fed product

    d) To explore processing options with small-scale meat processors.

    e) To develop a business plan that would combine the results of the production processing and marketing studies.

    Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.