Selling directly to the consumer may significantly increase profits and prices above those received in conventional markets. Small-scale operators and part-time producers, in particular, have the opportunity to market additional services or special aspects of their product and realize significant price premiums. Four types of activity are generally considered as direct marketing of livestock:
Selling directly to a packer/buyer on a live or grade and yield basis. This is the textbook type of marketing referred to as direct marketing in many market summaries and reports.
Setting up a slaughter facility and merchandising carcasses or retail cuts directly to the consumer.
Selling the live animal to the consumer who has the responsibility of making slaughter arrangements.
Selling all or part of the carcass to the consumer after slaughter by an established butcher shop. This option, often referred to as producing for the freezer trade, is the primary focus of this publication.
Advantages of Direct Marketing
The following discussion covers some advantages of this practice in relation to other selling methods. Potential for increased costs and other considerations are discussed under other headings.
Higher prices for small groups
By selling directly to the consumer, the producer sets the price and doesn’t experience the price discrimination generally encountered when selling small groups of animals. In contrast, most packers/buyers want large enough groups of livestock to pay costs of buying and trucking the animals; they are unlikely to make a trip to the farm to offer a bid on three or four steers. Even in auction markets, small groups of livestock tend to bring lower prices.
High prices for leaner and lighter weight animals
Small -scale producers can market animals to their own specifications without the large discounts experienced in markets involving packers/buyers. This may allow the producer to purchase and feed the smaller framed breeds. In conventional markets, for example, a steer weighing under 1,000 pounds may have been fed well and properly finished but bring as much as $5 per hundredweight less than a similarly finished steer weighing 1,200 pounds. However, in many localities, families prefer to buy the leaner and lighter animal fed in their area.
More net profit
A combination of higher selling prices, no sales company or buyer commissions, and lower purchase prices can help improve profitability. Small-scale livestock producers often have distinct disadvantages in production costs. Their fixed costs generally are spread over fewer animals, and feed costs tend to be higher because current technology is not used to
the extent that large producers use it. When selling directly to consumers, producers may set their selling price at a level that ensures profitability (if they know their production costs).
Better cash flow
By setting their own price and standards for the number fed and sold, market weight, and amount of finish, producers may know the market price prior to selling and perhaps even prior to purchasing or producing the feeder animals Marketing can coincide with cash needs (such as taxes) or accommodate a year-around schedule without the seasonal price fluctuations normally experienced in other marketing situations.