- Author: Dan Macon
Note: This post was adapted from my Foothill Agrarian blog.
I've read a number of Twitter threads over the last six weeks that have been focused on supporting local farmers and ranchers during the COVID-19 crisis. I think this is great! Anything that refocuses our food buying habits on local producers is positive, in my opinion. But even at the local level, our food system is a complex network of relationships, business and otherwise. And producing meat, especially pork, lamb, and beef, is even more complicated - by regulations, as well as by basic biology. I thought it might be useful to walk through my own decision-making process when it comes to how we market our lambs.
Fundamentally, we are in the business of harvesting grass and other vegetation with sheep. Through the miracle of rumination, our sheep are able to turn this forage into muscle, fat, bone, fiber, and milk. When it comes right down to it, we're in the business of turning the products of photosynthesis into meat and wool.
As ranchers know, not all grass (or broadleaf forages) are created equal - nor are they of equal nutritional value all through the year. As grazers, we must be concerned with both quantity and quality when it comes to creating an annual forage budget. And we must think about matching our production cycle with our forage availability - in other words, we need to balance supply and demand.
From a quantitative perspective, we have an abundance of green, nutritious forage (in most years) from March through mid-May on our unirrigated rangelands, and from April through late June on our irrigated pasture. After the "summer slump" (when temperatures are too warm for our cool-season forages like orchard grass and clover), we get a second (although lesser) peak in forge production in the late summer and early fall. The most challenging time for us here in the Sierra foothills and Sacramento Valley is mid-autumn through mid-winter - in Auburn, our irrigation water ends on October 15, so we must conserve last year's dead grass until the autumn rains germinate the forage on our annual rangelands.
In terms of quality, we focus largely on protein. The rumen microbes that break down cellulose and provide our animals with energy need at least 7-8 percent protein in the forage the sheep are consuming. Green forage is much higher in protein (typically) than dry grass - the forages on our annual rangelands and irrigated pastures right now (late April) are 14-20 percent protein; the dry grass that our ewes graze in July and August are 4-6 percent protein.
On the demand side of the equation, our forage demand (both in terms of quality and quantity) peaks as our ewes give birth and nurse their lambs. Non-lactating ewes have much lower feed demands - that's why we can graze them on dry annual grass in mid-summer. Growing lambs, on the other hand, need the most nutritious forage we can provide - they need energy and protein to grow muscle, bone, fat, and wool. Since we wean our lambs in mid-June at 65-70 pounds, this means that any lambs we plan to keep and finish on grass (at 100-110 pounds) need the highest quality forage we can grow. And we have a second (albeit) lower peak in nutritional demand in September, when we bring our ewes back to irrigated pasture to get them ready for breeding season.
Regardless of the forage type (green or dry rangeland forage or irrigated forage), we boil the considerations I've outlined into an estimate of sheep days per acre. This is sheepherder talk for estimating how many sheep one acre of forage will support for one day (cattle producers can do the same kind of estimate - one cow day's worth of forage will feed 5-6 sheep!).
Last summer, we grew (and harvested with sheep) just over 18,000 sheep days of irrigated pasture forage. If we divide this number by the days in our irrigation season (180 days, to keep the math simple), we see that we can graze 100 head of sheep on our pasture for the duration of the irrigation season. Let's break this down a bit further:
- From April 15 to June 15, we grazed 80 lactating ewes, 10 replacement ewes, and 110 lambs on our irrigated pasture. Based on how much each of these classes of animals consume, we estimate that we harvested about 9,000 sheep days in that two-month period.
- Once we weaned the lambs, we sold all but 35 of them (the sheep we kept included 20 replacement ewe lambs and 15 feeder lambs that we wanted to finish on grass). These sheep remained on irrigated pasture from June 15 through August 31 (for our purposes, let's say 75 days). These sheep consumed 2,625 sheep days worth of forage.
- From September 1 through the end of irrigation season on October 15, we had all of our sheep (ewes, replacement ewe lambs, and feeder lambs) on irrigated pasture - a total of 120 head. During this period, we harvested another 5,400 sheep days of forage.
- After the end of irrigation season, we had approximately 975 sheep days of forage left - with 120 head of sheep in our flock, this meant we had just over 8 days of grazing left on our irrigated pasture after the water turned off.
So how did a blog post about selling meat end up looking at grazing math?! Let's say that we wanted to direct market more lamb as individual cuts of meat (that is, finished and processed lamb). For example, what if we wanted to finish and direct market 75 lambs - could we do it with our current forage resources? From June 15 through the end of irrigation season, these 75 lambs would require 9,000 sheep days of our best forage. Since we'd already used 9,000 sheep days up to June 15, these lambs would require every blade of grass we could grow after weaning. We would have no grass for growing ewe lambs, nor would we have any grass for our breeding ewes. Our alternatives would be to purchase hay, lease additional irrigated pasture, or reduce the size of our breeding flock. We couldn't simply wake up on June 15 (weaning day) and decide to keep 60 extra lambs because we wanted to sell meat next November instead of feeder lambs next week.
The last issue for me is the added time and cost involved in marketing meat. In a good year, I know I can sell our feeder lambs in late June for $130-150 per head. If I decide to finish them and sell them as meat, I will incur additional costs beyond the cost of feeding these lambs for another 4-5 months. Once they're finished, it will cost me about $150 per lamb to have them harvested and packaged in a form that I can legally sell. I'll have multiple trips to the processor (which take me away from doing work on the ranch). I'll have the time involved in marketing and selling meat (which can be significant). I'll have the cost involved in storing meat. At our scale, I've found that selling meat results in higher gross income, but selling feeder lambs in June results in higher net income. In other words, we're more profitable selling a live feeder lamb in June that we would be selling meat in November.
- Author: Dan Macon
Direct marketing, for some farmers and ranchers, can be a way to capture more of the consumer dollar. By bypassing the middlemen - wholesalers, distributors, and retailers - direct marketing can allow a producer to receive retail value for his or her product. But direct-market meat is a different story. Direct-market meat requires substantial processing - the harvest and cut-and-wrap services provided by processing facilities and butchers require significant skill and capital investment. Over the last 50 years, we've lost local meat processing capacity - small local butchers simply don't exist in very many places. Many of us assume that increasing this processing capacity would solve the problem. In my experience, the solution isn't quite so simple. As someone who has marketed meat directly to consumers at a modest scale (120+ lambs per year at our peak), I have observed a variety of complicated questions regarding the real issues involved increasing harvest and processing capacity.
As a small producer, I wanted the ability to call a plant one week and deliver animals the next week. However, most of the small plants in our region are fully booked as much as a year out. A new small plant would be similarly impacted eventually – and from the perspective of the plant, it would be easier to have 10 clients bringing 200 steers (or 500 lambs) per year than to have 200 clients bringing 10 steers (or 25 lambs). In my mind, the only way to address this need for scheduling flexibility for the producer would be to build a plant with excess capacity, which is not economically efficient. This excess capacity would allow me to call the plant on Thursday to schedule a harvest, deliver my lambs the following Sunday, and have packaged meat by the next Friday. If the plant were running at capacity, it could not accommodate me.
Seasonality is related issue, in my mind. Grass-fed meat is a great opportunity for some producers, but typically not a year-round product for many small-scale ranchers. What will a new plant do to keep its crew busy on a year-round basis? I think this is another factor that pushes plants to find fewer, larger-scale customers.
Meat processing has largely been organized on a manufacturing model. The plant buys the raw product (livestock), converts it into meat, and then sells it to distributors, wholesalers, consumers, etc. The model we're talking about is a service model – the plant has to make money on the service it provides rather than adding value to product it owns. That's a very different model, one that is a struggle for existing operations (let alone new ones). For example, when we started with our regional processor, we could get a lamb harvested and fabricated for $50/head. The company soon realized that the cost of providing this service was much greater than the cost of the labor involved – they had to deal with 100 or more operations like mine that each wanted to harvest 10-15 head once a month. The cost is now $120-130 depending labeling and other factors. This is reflective of true cost of providing a service rather than selling a product.
Despite the interest in new processing capacity locally, there has not been any significant financial commitment from local citizens or producers towards the construction of a facility. This is where the rubber meets the road. And I suspect that this is the crux of the issue – there are both regulatory and economic barriers to entry in the meat processing business. The low return on investment for a service-oriented meat processing facility may make the economic barriers the more difficult to fix. I think if the economics were positive, we'd see private investment in new USDA-inspected processing capacity.
Alternatively, we may want to consider focusing on the regulatory barriers. Along those lines, a couple of things come to mind for me:
- There are inspection-exemptions for direct-marketed poultry based on scale of operation. In some circumstances, a poultry producer could harvest as many as 20,000 birds a year without USDA inspection and sell the meat directly to end users. No similar exemption currently exists for livestock.
- There was state legislation adopted last year making it legal for cattle producers to sell a live animal and for the buyer to then arrange for harvest and cut-and-wrap. There has been some confusion as to whether this new law applies to other livestock; the California Department of Food and Agriculture (CDFA) is taking the position that it only applies to cattle since cattle producers pay for an ownership inspection (e.g, brand inspection) at harvest. There is interest among other livestock groups (California Wool Growers, California Pork Producers, etc.) in extending this option to other species.
- CDFA could provide more state inspection (for a fee, perhaps). This could facilitate direct marketing of meat products.
This is probably WAY more information than anyone wants on this topic, but I do think it's important for us to understand the complexity of the issue. I guess I see a couple of important needs:
- Economic analysis and extension – I think UC Cooperative Extension (and others) could help small-scale producers (and large-scale, for that matter) better understand the economics of selling meat versus selling live animals. My very simplistic assumption when I started was that I would be more profitable selling $350 worth of meat than I would be selling a live lamb for $150. Reality was much more complicated. I think there's a need to help folks better understand this question. Producing a finished product (as opposed to a live animal) at scale is a complicated production and economic model for most livestock producers. It requires a very different set of skills.
- Research-to-policy – I also think there is a role for extension and others to help regulators understand the opportunities and barriers involved in direct-market meat production. This runs the gamut from ensuring food safety to understanding economics to quantifying consumer demand.
Many of my extension colleagues - in California and elsewhere - have spent considerable time and effort examining this problem. Their work has been exceptionally valuable - we have a much better understanding of the complexity of these challenges today than I did when I started in the direct-market meat business more than a dozen years ago. Perhaps these questions are part of the maturity process - the early pioneers must expose the weaknesses in the system. Some of these weaknesses are economic; others are regulatory. I'm hopeful that we're making progress towards discerning - and addressing - the most critical barriers.