By: Rob Leeds, Garth Ruff, Peggy Hall, Jacci Smith, and Tony Nye, OSU Extension
Producers who are seeking to increase income are looking for different ways to market their livestock. Direct to consumer marketing of livestock products is one-way producers are seeking to increase profits in their livestock sales. When exploring direct market possibilities there are several factors farmers must consider: regulations, consumer preference, marketing strategies, and pricing.
Regulation:
The Ohio Department of Agriculture (ODA) and the local Health Department are the two agencies that are responsible for regulating sales of meat in Ohio. ODA oversees the processing plants and sets the food safety regulations for the state. The local health department enforces the food safety regulations at the local level.
Producers can slaughter and sell their own chickens (up to 1,000 birds), rabbits, or non-amenable meats directly at the farm without a license if that’s the only food they’re selling, or with a farm market registration if selling non-amenable meats along with other low-risk foods. In order to sell “higher risk” meat products (including cattle, hogs, sheep, and goats) to the public, producers must have their animals processed at a fully inspected plant under state or federal meat inspection.
Meat processed in a fully inspected state processing plant will have a label in the shape of Ohio stating, “OHIO inspected and passed by Department of Agriculture.” The federally inspected product will have a circle on the label that reads the same, substituting “OHIO” with “U.S.” If producers are making special claims (organic, grass feed, all-natural) will also need to work with the fully inspected meat processor to develop an ODA approved label. In Ohio, there are also custom exempt plants. Products processed in custom exempt plants are intended for the producer’s own use, the meat cannot be resold. These products will be labeled “Not for Sale.” https://agri.ohio.gov/wps/portal/gov/oda/divisions/food-safety
Depending on the marketing strategy, selling meat from a fully inspected plant can require licensing. If a producer sells meat by taking orders, delivering the animal to the processing plant, and then the customer picks up the product when the processing is complete; no retail license is required. If you want to deliver pre-ordered frozen meat you do not need a license from your local health department, so long as the meat is delivered directly to the individual from the meat processing facility, without intermediate storage. If you are storing your meat you will need a storage location, which is considered a warehouse, and this must be registered and inspected by ODA Food Safety Division. A home cannot be a warehouse, but you may be able to use your garage or an outbuilding to hold your freezers.
Some local health departments only require a warehouse registration when selling a fully inspected product from your residence, but some require additional licensing. In order to sell a fully inspected meat product from a farm market or farmers market, it is necessary to get either a mobile food establishment license or a temporary food establishment license. A mobile food establishment license is for individuals that sell from a portable structure that routinely changes locations. This is the license that is used most often by farmer’s market vendors. A temporary food establishment license is for operations that operate for short periods of time. These licenses are obtained from local health departments. Each local health department sets fees and requirements for a license in their area. Producers should work with the local health department when considering marketing options. For more information on licensing check out, “Selling Food from the Farm: When do you need a license?” at https://farmoffice.osu.edu/sites/aglaw/files/site-library/Food%20Sales%20at%20Farm%20law%20bulletin%20final.pdf
Consumer Preference:
To explore the possibility of direct marketing it’s important to know customer’s preferences. For example; is there a market for whole, half, or quarters? What cuts of meat are preferred? What quantity is the customer seeking? What price points are relevant? Researching answers to these types of questions will help a producer satisfy customer needs. Many families do not have access to a large freezer space. This reduces their interest in buying meat in bulk. Most families may only want to buy the cuts of meat that their families prefer. Some areas have a higher per capita income which will be a factor in the price sensitivity of potential customers. These are examples of factors that need to be considered when developing a marketing plan.
Marketing strategy:
It is important to consider how to get your product in front of your customers. There are several options including; customer pick up, farmer’s markets, and on-farm sales. Each strategy has advantages and disadvantages. For example, selling the meat product via order and having the customer pick up the product at the processor’s requires no licensing on your part, and marketing is done in advance of producing the product. However, potential customers must have adequate freezer space. Farmer’s Markets are a good way to increase your price per unit and develop visibility for your product. However more effort must go into marketing, market hours are limited and structured, licenses are required, and sales are in smaller units.
On-farm market sales offer the same chance to increase the price per unit, give control over sale hours, and reduces labor taking the product to an offsite location. Concerns are a license is required, your farm must be kept presentable for customers, and you must be comfortable with and prepared for the liability of customers on the farm property. Keep in mind that any method of direct marketing will include a focus on developing your brand and customer service. Developing these customer relationships may require a new set of skills for some producers. Producers need to pick a marketing strategy that fits their enterprise and personal goals.
Pricing:
In order to determine a sale price, a producer must know how much saleable products can be produced and the total costs of producing that product. Two common methods of selling meat include selling a portion of the carcass including whole, half, and quarter carcasses, and selling retail cuts. If producers are marketing their product by having customers pick up the finished meat product; carcass weight will be the end product. Estimated carcass weight is Dressing percentage x live weight = estimated carcass weight.
Average dressing percentages are:
beef cattle – 62%
dairy steers-59%
market hogs- 74%
shorn market lambs- 54%.
If producers are looking to sell retail cuts, then carcass cutting yield must be calculated to estimate your saleable product. Cutting yield is affected by fatness, muscling, and bone-in vs boneless. Carcass cutting yield = (lbs of meat/carcass weight*100).
A careful analysis of the cost of production is necessary to set a retail price for a product. The main costs associated with producing meat are live animal input costs, processing fees, marketing costs, and profit margin. Producers should have all costs figured before pricing any end products. Before setting a price for each retail cut make sure to compare prices with local competitors. Local food producers should rarely be below a supermarket price. Through effective marketing of a quality product, a producer can build a brand and relationship directly with customers that lead to a profitable business venture.
More information:
Check out these videos from OSU Extension’s Ag Madness video series
“Direct Marketing Agriculture Products” from March 31, 2020
“How Producers Can Start Selling Food to Schools” from April 20, 2020
“Food Labeling & Regulations” from April 27, 2020