Specialty Market Pooling - First Choice Lamb Pool
Robert J. Melchior
(Market Coordinator for the Northeast Sheep and Goat Marketing Program at Cornell University from 2000 until his death in 2002)
How does a high cost, low volume livestock production system compete in the market dominated by national and international commodity type producers. This is the problem the Northeastern sheep producers face when planning and marketing their production. Survival and perhaps prosperity in the future requires seeking markets not served by the large commodity producers and also designing distribution to bind the final links in the marketing chain as closely to the farmer as possible. This provides the retailer or restaurant an identity for their product on which to build loyalty and to also use as a marketing tool.
Additional challenges in marketing in this region include supplying when the market needs the product, as opposed to when the livestock normally provide it, and providing farmers with an understanding and responsibility for the problems of the users of their product. Marketing chains have become so long with so many participants, that the producer has no contact with the user and never hears the compliments or complaints about the product.
Pooling and cooperative efforts have long been used by farmers to service markets with requirements beyond what an individual producer could provide. Wool, for example, has traditionally been grouped by region to provide the volume requirements of subsequent handlers. Pooling can also be used to overcome timing problems, as might occur with a marketing program requiring steady deliveries, or to consolidate trucking and reduce transportation cost per unit.
The Northeast Sheep and Goat Marketing Program initiated its first market pool recently, consisting of a group of five lamb producers and an ethnic meat retailer in New York City. The pool will supply the retailer with ten lambs per week all year long at a fixed price. The producers combined represent a total ewe flock of about 1200. All are on accelerated lambing programs and all but one also service other markets.
The product being marketed by the pool is a fat lamb carcass ranging from 30 to 40 lbs. In the restaurants, the carcasses are roasted on a spit over a bed of coals. Meat for meals is sliced off the roasting carcass based on the customers’ preference of cuts.
The retailer uses considerably more of these lambs than the ten being supplied by the pool. The balance are supplied by slaughterhouses that buy at regional auctions or from dealers. The slaughterhouses have difficulty coming up with a continuing supply of these specialty lambs, especially from January through June. In addition to roaster lambs, the store purchases finished Western lamb for retail cuts and other specialty lambs (hothouse) for holidays and by special order. Thus, if the pool proves successful, there is considerable room for expansion with additional roaster lambs or with hothouse lambs. Price considerations rule out supplying large lambs.
In terms of operations of the pool, the lambs are supplied to a rural slaughterhouse which has agreed to a flat charge to kill and deliver the lamb to New York City. The slaughterhouse receives its payment up front from the producer when he delivers the lambs. After delivery, the retailer mails payment for the lambs, based on the carcass weights provided by the slaughterhouse, to the pool manager, who in turn, forwards the gross amount received to the producer.
What have we gained by establishing this system? Our primary interest is in the producer benefit, which includes knowing in advance he has a market and the price that the lamb will bring. That price, incidentally, is superior to what producers could get for local delivery of their lamb in the current lamb short season of the year and will be far superior to prices available in the late summer and fall. The producer also knows the type of lamb to produce and can tailor his production system to move these lambs out as quickly as possible.
The retailer also has an assured supply. In the past when these lambs were not consistently available, consumption of this premium priced product was simply lost. Additionally, the retailer has an identity to where the lamb is originating, which he can use in marketing and also in providing feedback to the producers as to the quality of the product.
As a next step in market pooling the Northeast Sheep and Goat Marketing Program is exploring distribution to a regional group of restaurants in a seasonal tourist area. This project will involve breaking the lambs down into cuts and relatively small deliveries. Once again the goal will be to contract services to shorten the marketing chain and make the producers directly responsible to the user, in this case the restaurants. At the same time, the producer will benefit with improved prices and an assured market.
The Northeast Sheep and Goat Marketing Program at Cornell University was established to improve the marketing infrastructure for sheep and goat in the Northeast. The program is funded by the Lamb Meat Adjustment Assistance Program, which resulted from legal actions taken by the American Sheep Industry Association to limit the flow of cheap lamb imports into the United States. The program maintains a web site at www.sheepgoatmarketing.org which is designed to provide producers in the region with information to assist in their marketing efforts.