Value based marketing for fed cattle: A discussion of the issues

Abstract

The U.S. beef industry has been struggling with the erosion of domestic market share relative to pork and and poultry for several decades. Many factors may have contributed to this shrinkage, including the industrial organization of the domestic beef industry. A discussion of the institutional structure of beef production in the U.S., and the cash market for fed cattle, as possible contributing factors to the decline in beef's competitive position is provided. In the literature, a consensus agrees that average pricing of fed cattle in the cash market has contributed to beef's diminished competitive position. One solution to the average pricing problem which has gained widespread support is the idea of implementing a value based marketing system (VBMS); to replace the current cash marketing system. The value based marketing concept and the probability of it successfully supplanting the current cash marketing system for fed cattle is discussed and evaluated. A comparative empirical analysis of a VBMS relative to the current cash marketing system is reported. Evidence suggests that the ability of a VBMS to supplant the current cash marketing system will be dependent on the premium and discount structure.