FEATURE
Demand Driven Premiums By Laura Handke
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new demographic of information seeking consumers and export markets have fueled beef value-added marketing programs over the past two decades to provide cattle producers new premium-driven market opportunities direct from their farm or ranch. These noncarcass merit premiums have proven that the market is willing to pay a producer for management practices, age, source, and breed influence information. “Packers are contracting value-added cattle with feedlots way ahead of time, up to a year before harvest in a lot of cases. Then those feedlots have to go into the marketplace to find the cattle to meet those agreements,” says Doug Stanton, senior vice president of business development at IMI Global. “It puts a producer in a place where they have to plan ahead if they want to capture those premiums.” No matter which value-added program a producer chooses to participate in, the first step is market research and determining a breakeven price. Followed by establishing a budget to reflect the costs of the value-added marketing program. It’s hard to make money if you don’t know your numbers. “We have a variety of different programs that we can bundle together so that the producer and the marketplace have different options,” Stanton says of the IMI Global marketing opportunities.
Value-Added Program Options Source and age verification (SAV), followed by NonHormone Treated Cattle (NHTC) and the Verified Natural Beef (VNB) programs make up the foundation of value-added programs. Those three programs are part of the United States Department of Agriculture (USDA) Process Verified Program and have oversight by the Agricultural Marketing Service (AMS) to ensure all requirements have been met. IMI Global undergoes an annual audit by the USDA to be able to conduct audits and approve farms and ranches. In addition to the three core programs, many breed associations are also working closely with IMI Global to help their members find additional breed-related value while capitalizing on the marketing opportunities the core programs offer. The American Gelbvieh Association,
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for example, has partnered with IMI Global to create the Balancer® Edge program, which requires a minimum of 75% of the sires used to be registered Gelbvieh and Balancer® bulls, with a minimum of 25% Gelbvieh genetics. Because the verification process for the Balancer® Edge program also satisfies the SAV program, all cattle enrolled in Balancer® Edge can be marketed into the China Export Verification program, NHTC program for the European Union, VNB and CARE, a sustainability program encompassing animal care, environmental stewardship, and people and community. With the exception of the SAV, which producers can enroll in by submitting their first calf-last calf born records and an audit completed via phone call. All other programs require an on-site audit with annual renewal. “What we have done with the Balancer® Edge program,” Stanton says, “is added the Balancer® Edge verification to the source and age verification program. Those producers can still enroll in other programs, but that one verification provides them two verified claims for their cattle. The premiums have been a very good source of return for producers who choose to enroll.”
Demand Driven Premiums Since 2004, when SAV came on-scene in the cattle industry as a result of isolated bovine spongiform encephalopathy cases, premiums for the verification have stabilized. “We are verifying 30 months of age today, not 20 like we were when we started, and those ages can be verified at the packing plant, so we have seen the SAV premium decline some. Producers are still looking at a $1.50 (cwt) so around $7-8 per head return,” Stanton says. “When you move up to NHTC, we’re seeing around a $30 per head return and the natural market is very strong. It’s a domestic-only market that seems to see higher returns every year. On average, producers can expect around a $40 per head premium.” Tom Strahm, commercial marketing director for the American Gelbvieh Association agrees that crossbred cattle are also adding a level of genetic advantage in the feedyard and helping producers maximize their return on
