Development of Marketing Channel Assessment Tool for Livestock Producers

2011 Annual Report for ONE11-145

Project Type: Partnership
Funds awarded in 2011: $12,162.00
Projected End Date: 12/31/2012
Region: Northeast
State: New York
Project Leader:
Matthew LeRoux
Cornell Cooperative Extension- Tompkins County

Development of Marketing Channel Assessment Tool for Livestock Producers

Summary

Thus far the project is just about on-schedule, though data collection has been delayed due to difficulties collecting the necessary data from the farmers. While developing the Marketing Channel Assessment Tool (MCAT) for produce vendors, I experienced a similar struggle to get the producers to collect data. The breakthrough in that project came when a simple methodology was finally developed. While I started this project with a revised version of that data collection format, it has been difficult to get these farmers to complete the forms. I first piloted the forms on two of the 4 case study farms: one cheese producer and one meat producer. The final quarter of this project will bring changes to the forms and then an attempt to collect data at each of the four case study farms.

I have interviewed 3 of the 4 case study farms to learn more about their overall marketing, distribution, and pricing systems and methods. The interviews were informative and will allow me to write case studies about the marketing at each operation.

Analysis of the data has begun, and more importantly, development of programmed spreadsheets that will provide meaningful results has begun. Anticipated, but not yet solved, is the difficulty of tracking of inventory of individual cuts on livestock farms. I had expressed in the project proposal that the project would need to either track individual head of cattle and individual cuts of meat or units of time as the basis for channel comparison. This has proven to be confusing, however, it has also led me to believe that it will be more informative to simply track gross sales, hours of labor, and mileage in a given period of time to compare channels. Accepting this as I move forward on the project, I also see that it ignores the inherent labor and risk of inventory management and the relative levels of management required by each channel. Additionally, without tracking cut yields and pricing, it is difficult to reconstruct a relative hot carcass weight (HCW) price as a means of channel comparison. Inventory management may just have to be ranked by the farms separately, as opposed to distinctly being captured in the labor logs.

Objectives/Performance Targets

• Conducted first interviews with 3 out of 4 case study farms.
• Identified the factors for marketing channel assessment: Sales volume, labor required, marketing profit, associated costs, risk (lost sales), compatibility with lifestyle preferences, and degree of inventory management difficulty.
• Drafted data collection labor logs and Excel worksheets. Development of the collection and analysis tools continues.
• Began price, cost and yield analysis for 2 farms based on their pricing information.
• Created graphic of Finger Lakes Farmstead Cheese Co. pricing and distribution (attached).
• As discussed in the proposal, I collected labor log, price, invoice and weight data for the marketing of one head of beef. I have begun analysis on this data, however it is proving that a unit of time, rather than a head of livestock, is the better base unit.
• So far, using the data that I was able to collect, I have begun looking at ways to compare channels using:
• Weighted average price/pound for retail pounds in each channel.
• Hot carcass weight (HCW) equivalent price for each channel.
• “Marketing profit” per head for livestock marketed through each channel.
• Pricing matrices for cuts in each channel.

Description of Attached Documents & Images

Birdsall Beef Data2- This Excel file is the one that I am using to develop the means to compare marketing channels as well as a price “optimization” model by which to increase pricing in individual channels and improve their performance. Here is a short description of each sheet:

Time Allocation: A simple data entry sheet to enter labor logs and invoice information.

Time Allocation 2: The same data sorted by marketing channel instead of invoice date.

3 head: An attempt to account for all beef sold from 3 head processed in October.

1 Steer: An attempt to account for all beef sold from one steer, valuable for comparisons to live animal channels.
Restaurant/Farm Store: Accounting of all pounds and dollars from sales to individual channels.
RestFS Combi: Combined data from the individual channel sheets, used in part, to compare individual cut yields to Angus Association standards.

Price and Time: The beginnings of a cost, sales, and labor calculator for channel comparison.
LMCAT: A rough draft of a final channel comparison sheet.

December Draft LMCAT MacCheyne- Initial data from Tina MacCheyne, High Point Farms. So far, I have only asked Tina for pricing data for each utilized channel. This workbook is an attempt to compare which cuts each channel uses and at what price. Ideally, I can reconstruct an equivalent price/pound for hot carcass weight (HCW), which would be ideal for comparisons with live animal channels, including the Freezer trade.

Yield and Cost, Pricing Sheet, and Price and Time Comparison: These are as of yet, un-used spreadsheets, previously developed.
Beef: Pricing data for each channel, submitted by the farm.
Upstate CSA, NYC CSA, Rest Groc, Own Store, Freezer: Each of these sheets is an attempt to calculate an average price per pound for each channel as well as to work backwards into a HCW price/pound.

FLFC Labor Logs: The labor log created for Finger Lakes Farmstead Cheese Co. A similar log form was used at Birdsall Beef.

FLFCC Pricing & Channel Distribution: A graphic of the complex pricing and marketing channel utilization for Finger Lakes Farmstead Cheese Co.

Accomplishments/Milestones

I set out to work closely with four case study farms on this project. This has not gone as well as I had originally hoped. However, one farm, Birdsall Beef, is very cooperative and has done the most work on the project, though the labor logs that they submitted were incomplete. Working with Birdsall, we have been able to track all the meat sales from one carcass and nearly all of the labor. The initial data, though the labor logs are incomplete, indicated that the restaurant marketing channel is not performing as well as the farm had hoped. During the time of this study, commodity prices for grain (and thus feed), feeder cattle and finished cattle have all soared. In light of this, the Birdsalls are questioning whether or not to continue direct marketing to restaurants. I am building a marketing channel tool based off their data to compared profitability with commodity markets in order to answer this question. Perhaps more importantly, I am creating a pricing calculator that makes it easy to set prices on individual cuts in such a way as to track profitability. Using this, I expect farms will be able to set pricing in order to make a given channel more competitive with commodity prices.

I received the labor log and sales information from the cheesemaker, Finger Lakes Farmestead Cheese Co. a few days before this report was due, so minimal analysis has been done. The cheesemaker did however provide a great interview and description of the marketing, pricing, and distribution system they employ. An illustration of their system in attached.

High Point Farm has also cooperated on an interview and pricing information. Once an improved labor log system is developed, I expect they will be good about completing that as well. The fourth farm, Autumns’ Harvest farm hasn’t been responding, thought they claim to be willing, they usually cite their busy-ness as the reason for not being available for interviews and data collection.

Impacts and Contributions/Outcomes

The development of an easy-to-use marketing channel assessment methodology and spreadsheet was expected to be slow. Thus far, the farms have participated a little less than I expected, however many different ideas for channel comparison have come from the experience with the two with whom I have worked closely. Once the tool is developed, and complete, reliable data is entered, I believe that the impact will be for the participants to adjust their pricing in poor performing channels in order to improve their overall marketing, rather than to drop channels entirely. This is a different strategy than among the produce farms on which we have already conducted the MCAT. In those instances, most farms elected to choose channels that required less marketing labor, including choosing to sell to distributors instead of making all their own deliveries to restaurants and stores.

The concept of a LMCAT has been widely embraced with enthusiasm. Direct marketing farms all relate to the problem of confusion about the relative performance of their marketing channels. I have presented the premise of the Livestock Marketing Channel Assessment Tool (LMCAT) to producer groups as well as other cooperative extension colleagues including at the New England Livestock Extension annual in-service, the Cornell Cooperative Extension annual in-service for agriculture and food systems and the Strategic Marketing for Livestock Producers courses offered to farms in July and September.

Collaborators:

Nancy Richards

nancy@bhcheese.com
owner
Finger Lakes Farmstead Cheese Co.
5491 Bergen Rd.
Trumansburg, NY 14886
Office Phone: 6073873108
Heather Sandford

sandfordheather@yahoo.com
owner
The Piggery
5948 Sycamore Creek Dr.
Trumansburg, NY 14886
Office Phone: 6073422245
Website: thepiggery.net
Sarah Haws

harvestfarm12@yahoo.com
owner
Autumn’s Harvest Farm
5374 McDuffie Town Rd.
Romulus, NY 14541
Office Phone: 6078693879
Website: www.autumnsharvestfarm.com
Heather Birdsall

heather_hicksb@hotmail.com
owner
Birdsall Beef
143 Ripley Hill Rd.
Homer, NY 13077
Office Phone: 6077454854
Tina MacCheyne

tina@highpointfarms.net
owner
HighPoint Farms
9448 State Rt 96
Trumansburg, NY 14886
Office Phone: 6073874950
Website: www.highpointfarms.net