Crunching the Numbers for Retail Meat Sales and Live Animal Sales - PowerPoint PPT Presentation

Crunching the Numbers for Retail Meat Sales and Live Animal Sales Andrew P. Griffith Assistant Professor Extension Livestock Economist

What can I market? • Live animals – Stocker/feeder cattle • Traditional methods (auction market, value added, etc.) – Finished/Fed cattle • Traditional avenues (Cargill, Tyson, JBS, etc.) • Local consumers for local harvest (live animals: wholes, halves, quarters, etc.) • Meat – Steaks, roasts, other muscle cuts, ground product

Demand and Market Size • Stocker/feeder cattle – Easiest, multiple sales and multiple buyers every week • Finished/fed cattle – A long way from large commercial facilities – Must have sufficient demand by local consumers to meet objectives for sales, profits, etc. for live cattle sales • Meat – Some cuts will sale better than others – Determining the correct mix of steaks, roasts, other muscle cuts and ground product can be a challenge

Focus for Today • Marketing and pricing live animals for custom ‐ exempt processing • Pricing and direct marketing meat • Pricing to cover costs/Break ‐ even pricing • Pricing a profit objective

But First • Regulations: Live animal vs. Meat – What do I have to do to market a live animal? • Sell a live animal! • Custom ‐ exempt processing can only be done for the owner of the animal and cannot legally be sold. – What do I have to do to market meat? • Harvested under USDA inspection • Retail Meat Sales Permit from TDA.

Live Animal Sale Suggestions 1. Clear communication in all transactions 2. Avoid terminology associated with “meat” 3. Set sale price for the live animal 4. Provide and retain detailed bill of sale 5. Document transfer of funds for live animal 6. Customer should pay processing fees 7. Transportation of animal to processing facility

Livestock Bill of Sale • Date of transaction • Names and addresses of buyer and seller • Description of animal • Dollar value received by seller/ paid by buyer • Payment method (cash, check, etc.) • Delivery services agreed on • Buyer and seller signatures

Ways of Calculating Costs • Calculate actual cost of production: breeding of cow through sale of live animal or meat • Value of weaned calf plus cost of production from weaning to sale of live animal or meat

Value of Weaned Calf • Using the value of a weaned calf captures opportunity cost • 500 lb steer calf at $196 cwt – $980/head

Decision Time • Are we going to provide a grain based diet or strictly a forage based diet? – Grass fed, Grass fed and grain finished, Organic, Natural, other alternatives? – Have to know the market

Grain Based Diet with Pasture • Cost of backgrounding the calf – Carrying the calf from 500 lbs to 800 lbs • Cost of finishing the animal – Carrying the animal from 800 lbs to 1300 lbs

Backgrounding Cost • 500 lbs to 800 lbs – ADG = 2.0 lbs (150 days = 300 lbs) – Feeding 2.5% of bodyweight • 1.0% hay/pasture (974 lbs) • 1.5% grain supplement (1,460 lbs) Item Price Cost Hay/Pasture $85/ton $41.37 Grain $225/ton $164.28 Salt/Mineral $0.18/lb $4.86 Vet/Med $15.00 Death Loss 2% $19.60 Interest charge 4% $20.14 Total Backgrounding Cost $265.25

Finishing Cost • 800 lbs to 1,300 lbs – ADG = 3.5 lbs (143 days = 500 lbs) – Feeding 2.5% of bodyweight • 0.3% hay/pasture (450 lbs) • 2.2% grain supplement (3,299 lbs) Item Price Cost Hay/Pasture $85/ton $19.12 Grain $225/ton $371.09 Salt/Mineral $0.18/lb $5.40 Vet/Med $8.00 Death Loss 1% $12.45 Interest charge 4% $26.03 Total Finishing Cost $442.10

Total Cost of Production Item Cost Value of Weaned Calf $980.00 Total Backgrounding Cost $265.25 Total Finishing Cost $442.10 Labor Cost $20.00 Fixed Cost (taxes, ins., depr., main.) $37.50 Total Cost $1,744.85

Break ‐ Even Pricing • Live Weight – $1,744.85/hd ÷ 1300 lbs • $1.34/lb • Dressed Weight (Illustration Purposes Only) – 60% dressing percentage – $1,744.85/hd ÷ (1300 lbs × 0.6) • $2.24/lb

Profit Objective Pricing Profit Objective Revenue Live Price $100/hd $1,844.85 $1.42/lb $200/hd $1,944.85 $1.50/lb $300/hd $2,044.85 $1.58/lb ���� ����� � ����� ���� � ������ ��� ���� ������ $�,���.���$��� $1.42/lb � �,��� ���

Marketing Meat? • Additional cost when marketing meat as individual cuts and as ground product – Transportation (live animal to processing facility) – Processing ($0.35 ‐ $0.45/lb) – Transaction (time, transportation, time, promotion/advertising, time)

Processing Cost • 1,300 lb animal dressing 60% (780 lbs) – $0.35/lb ‐ ($273/hd) – $0.40/lb ‐ ($312/hd) – $0.45/lb ‐ ($351/hd)

Break ‐ Even Pricing Meat Item $0.35 $0.40 $0.45 Production Cost $1,744.85 $1,744.85 $1,744.85 Processing $273.00 $312.00 $351.00 Transportation $20.00 $20.00 $20.00 Transaction $100.00 $100.00 $100.00 Total Cost $2,137.85 $2,176.85 $2,215.85 Break ‐ Even Price $2.74/lb $2.79/lb $2.84/lb Transaction cost are extremely variable and can account for a large portion of total cost

Break ‐ Even Prices Too Low • Some cuts may not be easily marketed – Liver, stew meat, etc. • Availability of certain cuts – Not enough steaks, too many roasts! – Ground beef? • If I can’t market it as a muscle cut, should I grind it? – Depends if the ground beef is easily marketed

Other Considerations • How long am I willing to keep meat in the freezer before it should be discarded? – Consumers may have a preference • Determine the mix of cuts – Cannot have your cake and eat it too – T ‐ bone or New York Strip and Filet Mignon

Other Considerations • Pricing of different cuts to achieve price objective – Steaks, roasts, and ground beef priced differently • Pricing can be effected by time and place of marketing – Spring vs Winter – Metropolitan vs. Rural

Thank You