Roundtable: Can I make money selling grass fed beef (continued)….

We could call this Exhibit A in our discussion.  Someone who is making money with a small grass fed beef farm.

If you want to begin at the beginning, scroll down to the roundtable that featured four men with wide experience in all phases of grass fed beef marketing….local to national…operating solely or in combination with others.

But, to see what a “practioner of the trade” would say about all this, we sought out Guille Yearwood of Ellett Valley Beef Company in southwest Virginia.  Guille is both a pure bred Devon breeder and commercial cattleman and is a member of the board of the American Devon Cattle Association.  Whether you’re a newcomer or an old hand, we think you could profit from Guille’s thoughts:

Currently we are enjoying a fabulous niche market for grassfed beef and it looks like it should continue to thrive for years.  People do have a tendency, however, to take a good situation and turn it into a mangled mess.

Small farms and most small enterprises in general, including mine, are rather inefficient despite the hard work and good intentions of their owners.  Small grassfed operations cannot capture any economies of scale and thus their production costs are very, very high.  The processing plants that are available are also very small businesses with very high production costs, thus their fees to the grassfed producer are very expensive.  In this scenario the grassfed product must be sold at high margins to have a prayer of making a profit.

A cooperative venture could possibly increase sales for a producer but it seems most unlikely that it could increase profitability.  More hands will be in the till, and unless a co-op can find a way to reduce processing costs significantly (my estimate is the typical grassfed producer pays about 7 times more for processing than it costs a large scale commodity beef supplier) it will result in lower margins for the producer.

Small producers must sell at higher margins.  They can’t sell profitably at wholesale or commodity prices because their costs are too high and they have limited volume.

It would please me for much of the grain land in our country to turn into finishing pastures for grassfed beeves, and it would be wonderful to have healthy grassfed beef available for people of all income levels.  However, when and if that happens, our little heyday will be over.  When grassfed becomes a commodity item profitability for most small farms will disappear.  You can’t compete in a commodity business without significant volume.

I agree with Jeff Moore that many grassfed cattle are not properly finished before processing.  Demand is so strong that some producers, particularly those with wholesale customers, must harvest cattle to fill orders regardless of their condition.  Slaughtering lean, lightweight cattle isn’t profitable in the short run and it will ruin your business in the long run.

Here are a few items that I think are crucial to profitability for small grassfed operations, particularly for beginners:

1. Understand grass management.  Improve your pastures before you spend money on anything else.  Then spend your money on cattle.
2. Use the right genetics.  It’s fairly simple:  use a great Devon bull on moderate-framed, easy-fleshing beef cows.  Heterosis will add 25% to your net production, if you start with the right cattle.
3. Get your cattle fat before you harvest them.  If you don’t know what fat is, find out.  Quick.
4. Be careful about selling to wholesale accounts.  If you can’t sell your beef at high margins you’re probably better off right now to sell your cattle on the hoof.  That could change when cattle prices decrease.
5. Keep your costs as low as possible.  Don’t have much equipment laying around.
6. Beware of people and vendors who specialize in selling concepts, systems, and equipment to grassfed beef producers.

I thought it interesting that Guille estimated the small grass fed farmer is paying about seven times more for processing (butchering and packaging) than the big boys.  That is in line with our own research.  It costs us in the neighborhood of $400 for processing depending on the size of the animal compared to the $50 the large meat companies are paying.

That’s a major reason why grass fed beef costs more….that, and to a lesser extent, the length of time the steer must be held to finish properly.

The conclusion would seem to be that, unless you raise grass fed beef for the love of it and/or a dedication to community health, you’d be better off shipping your steers to the auction barn and taking the commercial price.

Thanks to Guille Yearwood, and again to Bill Roberts, Ridge Shinn, Jeff Moore and Jeremy Engh for taking part in this interesting and we hope useful discussion.