Beef producers mull price and value

By STEVE SUTHER
Black Ink

“You get what you pay for” is a saying that often assumes limitations. It comes to mind when you or a friend find disappointment in a supposed bargain.
Add an intensifying phrase and it points out that quality costs more, too. You really do get what you pay for.
For many years, good value meant low price and acceptable quality.
But some time in the last 10 years, consumer studies began to show quality trumps price when shopping for beef. The higher beef prices trended, the more important quality became.
In the long run, price and value are the same, but in the short run, almost never. As Warren Buffet put it, “Price is what you pay. Value is what you get.”
It takes time and experience to sort out the difference between a real bargain and regret.
Prices for cattle and beef are up. What about the value?
You probably sold cattle for the most, per-pound or per-head, ever in your life in the last year. Were they worth it to the buyer?
Just because somebody pays the price doesn’t mean they’re satisfied. The beef and cattle businesses have become “high steaks” games.
Let’s say you’re selling bulls. With average prices often $1,000 higher than last year, your reputation has never been under greater scrutiny.
Many bull auctions had a spread of more than $10,000 top to bottom this year, but of course nobody can use a line like, “Well, what do you expect for only $4,000?”
Over the next few years, let’s say the bulls perform as expected, their calves make money in the feedlot and hit the quality beef target even as their daughters improve the herd. In that case, the top-end purchases will say, “You really do get what you pay for.”
Let’s say you’re selling calves. Maybe you topped the auction at $3 per pound or partnered with a feedlot at such a price. Maybe you “got rid of them” for $2.20 per pound.
In any case, the pressure is on your reputation.
Will the limitations come to mind, or satisfaction at finding intrinsic value?
Let’s say you’re selling beef. Auction is not an option, and a retailer has only days to sell fresh product.
It has to look great, and it helps if it’s backed by a quality grade or brand that reassures the buyer this will be worth the price. Ordered from a restaurant menu, the experience has to make us realize, we really do get what we pay for.
Commodity markets are supposed to deal in perfectly interchangeable units. Many people consider cattle and beef as commodities – unless they have personal experience.
Too much is at stake today for any producer to think and act as if all are the same.
They’re not like real estate with each being absolutely unique, but the differences between individuals, cuts, brands and quality grades are increasingly important to buyers at these record prices.
On average, cattle and beef are good values.
We know “value” has another meaning.
There are some things you won’t do for a higher price because of your values. The right thing to do is sometimes not the most profitable. But when it is, a bright light shines on the realization.
High-quality beef commands a higher price. It is produced by attention to detail in selection and management, and making sure cattle never have a bad day. Demand studies show an increasing supply of lower quality beef is twice as likely to reduce the price as increasing the supply of premium Choice and Prime beef.
The road most in line with the high road of values is the same road to a more profitable future for your cowherd enterprise and your family.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Steve Suther may write to him in care of this publication.