Analysis of alternative coordination mechanisms for the Saskatchewan cow-calf sector
Kularatna, Hemal Dharmasena
This study analyzed alternative production and marketing arrangements for the Saskatchewan beef industry where the focus was on the cow-calf sector. The study was based on primary data collected from 185 cow-calf producers through a mail survey. The results indicate that the Saskatchewan cow-calf sector is characterized by a large number of small producers with a herd size between 50-100 cows. There is a considerable integration of cow-calf and backgrounding functions. A large majority of producers recognized that declining beef consumption in North America was a problem for the beef industry. This was primarily attributed to the lack of product consistency and not producing the product that the consumer wants. Some producers are responding to this challenge by introducing improved management practices such as improved breeds and feeds. However, there are very few attempts being made to establish joint ventures (or contractual arrangements) with feedlots and slaughter/processors. Producers felt that increased vertical and horizontal coordination were essential for further improvements of the beef industry. They thought that the development of ready-to-eat beef products was very important along with improvements in meat quality. This includes a need for improvement in meat standards and the grading system. Given its current problems producers, however, were highly optimistic about the future of the beef industry. Producers felt that a Australian Marketlink type program would result in a loss of independence, requiring higher capital investment and inconvenience of third party verification compared to the Meat Standards Australia (MSA) type program. They felt that a Marketlink type program is more likely to emerge in Saskatchewan in the next five years than a MSA type program. They also tended to prefer other initiatives, which focused on carcass-based pricing linked to eating quality. The importance of the beef cattle enterprise to producers net family income and the experience the producers have in beef cattle operations were found to be the most important factors supporting increased coordination. Conjoint analysis results showed that producers' preferences are toward producing backgrounded cattle meeting buyers' requirements and selling at auction markets. Based on these results, it can be concluded that Saskatchewan beef producers are prepared for a more coordinated beef industry.