Breaking The Mold

DR. ANDREW P. GRIFFITH

KNOXVILLE, TENNESSEE

A mold is used to consistently form or shape something, and for the most part they do their job. Though a mold is meant to reproduce one thing consistently without any recognizable difference, there are times when there may be some minor observable difference. Other times, there may be a quality difference in two items that came from the same mold due to the raw product having some impurity. This may result in one of them being useful and the other not useful. To further this thought, there can come a time when the mold has reached the end of its useful life and must be replaced. Before anyone quits reading, hopefully this can be related to cattle production and markets.

In the cattle business, consumers demand a product that can be reproduced time and time again. For instance, a Big Mac hamburger in Tennessee should taste the same as a Big Mac hamburger in any other state. Similarly, when a person goes to a restaurant and orders a steak, they want that steak to have the same tenderness, juiciness, flavor, and provide the same eating experience they had the last time when they thought it was the best steak they had ever eaten. This could even be brought down to cattle producers who sell freezer beef. A consumer purchasing a finished animal to have harvested and put beef in the freezer would probably prefer they be able to tell no difference in the beef of the calf they purchased last year and the one purchased this year if they deemed it to be “good” beef.

Considering this same idea from the production standpoint, there are many cattle producers attempting to produce calves, feeder cattle, and finished cattle that all look like one and the same on the outside and the inside. They do this via managing genetics, feeding, and any number of other management decisions. Alternatively, there are producers who have one for everybody in their pastures. On a similar note, producers tend to do the same thing every year, which is similar to using a mold to make any number of goods.

This brings the article to its real purpose, which is the mold related to marketing cattle. There are many ways to market cattle along the supply chain. From the cow-calf producer standpoint, a live auction tends to be the most prevalent method of marketing cattle while private treaty transactions also are fairly common. It is less common to forward contract calves and feeder cattle, but it does happen. Shifting to the feedlot, there are several methods of marketing finished cattle between the packer and the feedlot. Over the past couple of decades, most of the trade has shifted from negotiated cash trade to formula trade, which has some reliance on negotiated cash trade. Additionally, there are some cattle that are marketed using forward contracts of some sort. Any of these marketing tools can be used, and they can be based on a live animal, a dressed carcass or a grid.

The issue with the cattle marketing mold is that every body and their sister plus their grandmother’s third cousin wants to have a say in how packers and feedlots should do business and trade cattle. There are some groups that think the government should step in and interfere. The only people that want government intervention/interference are those who stand to “gain” something. When the shoe is on the other foot, that same person wants the government to stay out of it.

This is not an article to choose sides. What it is about is breaking the mold. Cattle feeders and packers broke the mold of how they traded cattle, because they found it to be more efficient and probably reduced transaction costs. They will probably continue to find more efficient ways of doing business. This brings the question if producers in the cow-calf and feeder cattle sectors may need to break a mold or two in how they do business? This is not saying the system is not good. It is more of questioning if a person is trying to find a better way.  ∆

DR. ANDREW P. GRIFFITH: University of Tennessee