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Relative to competing proteins, the beef industry has lagged in its ability to integrate productions segments. The inherent nature of protein production from ruminants dictates that some obstacles to vertical integration in the beef industry are relatively permanent in nature. Simply the vast differences in environments across the country and the way seedstock producers, cow-calf producers, backgrounders and feedyards respond by implementing more localized production and management practices creates a setting where “one-size-fits-all” is virtually impossible. True vertical integration requires control from start to finish. Control from start to finish of production and marketing occurs most readily with complete ownership. This gives the ability to make quick, serious and lasting changes in either or both. Without complete ownership, the look of vertical integration can be achieved through means such as relationships, partnering, alliances, coordination or communication to name a few. Because control is hard to achieve without complete ownership and ownership is too capital intensive, the beef industry generally remains quite segmented. This is especially true when expressed on a sheer numbers or volume basis. Two traditions in the beef industry, namely independence and trust are seriously tested when approaches to vertically integrate without complete ownership are implemented. Still, relative to just 10 years ago, the industry has changed remarkably in it’s attempt to create the efficiencies of vertical integration while still recognizing the limitations imposed by the inherent nature of the industry. The Strategic Alliances Demonstration Study conducted by NCBA in 1992 served as the definitive impetus for the industry to explore and create relationships and alliances that acted like a vertically integrated industry. Change in the beef industry is nothing new. However, change at the pace we are experiencing it today coupled with impact on the core “look” of the industry is almost impossible to grasp. Who in the beef industry, 10 years ago would have predicted:
1. The largest poultry integrator is also the largest beef packer.
2. The largest pork integrator has become a major player in the beef industry with recent and imminent acquisitions potentially moving them to the second largest beef packer.
3. Virtually every major packing company and branded beef program offers a value-based system to purchase cattle.
4. Carcass data is the norm rather than the exception for cattle sold on a dressed basis.