Pennsylvania Bred and Fed: Keystone Beef's Aggregation and Marketing Boosts Income for Small-Scale Cattle Producers
Nearly 200,000 beef calves are raised each year on more than 12,000 farms in Pennsylvania, yielding gross receipts that top $600 million, That makes beef the state's second most valuable agricultural commodity (dairy ranks first).
About 96 percent of the state's beef is produced on small family farms that average fewer than 50 head. These producers are highly dependent on income from the sale of their livestock, but the small scale of their operations hurts their profitability in an industry that increasingly buys calves only in large quantities.
Pennsylvania's family farms have traditionally sold beef calves in small lots of about 10 head, usually through the state's 31 licensed auction barns or buying stations. Large cattle backgrounders (see sidebar, page 7), however, prefer to buy 500-pound calves in 90-head truckloads. As a result, Pennsylvania cattle producers receive an average of $100 to $150 less per head than do beef producers in states with larger cattle operations and/or an infrastructure that supports producer-aggregated marketing and sales.
The lost income is often reaped by dealers who buy calves from these small farms, then aggregate them, capturing higher prices by offering the larger volumes sought by backgrounders, many of which are based out of state.
Keystone Beef helping small producers
Helping small producers address this market imbalance is the Keystone Beef Marketing Network (KBMN), formed in 2010. It is not only helping producers aggregate and market their cattle jointly to boost their income, but also to realize the value added that comes from marketing "natural" and "local" beef.
Jim Henry, a long-time Pennsylvania cattleman and a co-founder of KBMN, says the lack of aggregation of small lots of cattle has resulted in a "highly fractured market" that has hurt producers in the Keystone state. "With more than 50 percent of Pennsylvania calves currently exported to backgrounders in other states, individual producer sales to dealers not only reduces producer income ... but also dilutes the remaining availability of 'Pennsylvania bred and fed' cattle to meet local and regional market demands at premium pricing," Henry says.
Increasing consumer interest in food safety and knowing the source of their food is expanding demand for locally grown and all-natural beef products. KBMN is addressing this demand by marketing its members calves as "Pennsylvania bred and fed"--cattle born, raised and harvested in Pennsylvania by farmers who adhere to their association's quality-assurance protocols, including traceability to the farm that produced the beef.
Developing a value-added supply network
To illustrate the producer-based aggregation and marketing deficiency in Pennsylvania, Henry and fellow cattleman John Sargent presented multi-year statistics of calf sales from three livestock auction barns to the Pennsylvania Department of Agriculture (PDA) in March 2010. Their data documented substantial loss of producer income under the current marketing system. Convinced of the need for--and the benefits to be derived from--aggregated beef marketing and sales, the PDA awarded a $115,000 two-year grant to help launch an effort to promote greater use of cattle aggregation and sales coordination.
This funding spurred Henry and Sargent to co-found KBMN in New Bethlehem, Pa. KBMN is a nonprofit agricultural producer group legally formed in June 2010. It operates with a volunteer board of directors that is entirely comprised of Pennsylvania cattle producers. KBMN's primary purpose is to coordinate statewide cattle programs to enhance Pennsylvania cattle producers' profitability through aggregated marketing and sales of "Pennsylvania bred and fed" beef stock.
Current inventory management requires sales to both local and regional markets, but KBMN's mission includes a special emphasis to develop the cattle backgrounder industry in Pennsylvania as a key component in the production cycle. …