018—Lancaster Farming, Saturday, August 14,1982
Direct meat market fattens farm profits
WASHINGTON, D.C. - Fruits,
vegetables, and flowers aren’t the
only home-grown products that
farmers sell directly to consumers.
Some farmers have turned
livestock and poultry operations
into thriving direct-marketing
businesses.
In surveys covering 22-states,
farmer-to-consumer livestock and
livestock product sales
represented only about IS percent
of all direct marketing receipts.
However, this 15 percent added up
to nearly $9O million in annual
farm earnings, according to Hal
Linstrom of USDA’s Economic
Research Service.
Included in the figure are direct
sales of livestock and poultry
meat, livestock byproducts, eggs,
and live animals. Dairy product
sales, which are reported
separately, would raise the total
another $44 million. Dollar volume
in all categories is, probably higher
today because the surveys date
from 1978 to 1960.
Within the livestock marketing
group are some of the most
specialized of direct sellers:
farmers who raise, slaughter,
process, and retail their animals.
No one knows for sure how many
operations fit this description
nationwide, but interest in this
type of marketing has been
growing, Linstromsays.
To learn more about direct
marketers of livestock and meat,
the Economic Research Service
and the Texas Agricultural Ex
periment Station conducted a
study of nine Texas farm
operations that handle livestock
from production through retail
sale. For comparison, analysts
also looked at eight nonfarm
operations that buy livestock and
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custom slaughter the animals for
retail and wholesale customers.
The recently completed study
focused on beef and pork
operations, although some of the
findings might apply to other
livestock products as well. Data
cited apply to 1980.
Both the farm and the nonfarm
firms were relatively small. The
farmer-owned operations
slaughtered an average of 47 cattle
and 24 hogs a week, while the
nonfarm firms average 42 cattle
and 17 hogs.
All the operations provided
custom slaughtering and
processing services, including
killing and skinning the animal,
dividing the carcass into cuts, and
wrapping, freezing, and smoking
the meat according to the
customer’s preference. A few
rented locker space to their
customers for storage of frozen
meat.
In most cases, business was
divided between custom
slaughtering for retail and
wholesale customers and retail
sales of fresh meat cuts. Retailing,
rather than selling to butchers and
other wholesale buyers, has been
the part of the business that has
shown the most rapid growth over
the last few years, according to
Linstrom.
Some firms charged up to $lO a
head for custom slaughtering,
while others had no extra charge
as long as the customer left the
hide and byproducts. Cattle hides
sell for about $45 per cwt.
Byproducts are about 40 percent of
the animal’s live weight and
contribute 5 to 10 percent to
packers' gross sales.
On the average, farmers
charged'slightly more than $4 a
head to slaughter a cow or steer
in addition to keeping the hide and
byproducts and 13 cents per
pound of carcass weight for
processing. Nonfarm firms
charged about the same for custom
slaughter but around 16 cents per
pound for processing.
For hogs, farm firm slaughter
charges averaged $6.23 plus
byproducts, and processing
charges averaged 13 cents per
pound. Nonfarm firms charged an
average of $9.13 per hog plus
byproducts for slaughter and 17
cents per pound of carcass weight
for processing.
The Texas producers in the study
said they went into the direct
marketing business to cut out the
'‘middleman” and, thus, earn a
greater profit. In general, they
seem to have been successful.
They showed better returns for
both steers and hogs compared
with sales through conventional
outlets. Returns averaged $5l
higher per steer and $l9 higher per
hog for their meat cuts, and dial’s
after figuring in a return to cover
the additional capital • and
management required in such
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operations.
Producers saved on tran
sportation and selling costs, such
as commissions and auction fees.
They also gained some of the
profits normally added in the
slaughtering, processing, and
retailing stages.
Their retail customers also
benefited. Consumers saved 10 to
12 percent off supermarket prices
for their meat purchases, Lin
strom says. Eight beef and pork
cuts average $1.95 per pound when
retailed at farmer-operated
businesses, $1.98 at the nonfarm
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custom slaughter firms, and $2.21 (
at butcher stores and super
markets.
The integrated farmer
operations sold mostly ungraded
beef comparable to LfSUA Good.
Supermarkets and specialty meat
stores sold USOA Choice beef. The
quality of pork was about the same
for all types of businesses.
' "This case study suggests that
direct marketing of livestock and
livestock products can often be
profitable for small and part-time
farmers and for consumers as
well,” Linslmn says.
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393-6530
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