Buffalo survivors have advice for other niche meat marketers

By Allan Nation

DENVER: In 1997, buffalo were the “hot” niche meat product.

However, prices collapsed in 2000 and today, while prices have recovered, the buffalo industry is a fraction of its former size.

Are there lessons here for other niche meat products? I think so.

To that end, I interviewed several of the “survivors” of the buffalo price collapse for their insights and advice.

Chad Peterson’s family has been raising grassfed buffalo near Newport, Nebraska, since 1937.

He said the buffalo business was a license to print money in the mid 1990s for active traders like himself.

“I made a thousand dollars on every buffalo I touched,” he said.

He was able to parlay such exceptional returns into a 9000-acre Sand Hills ranch by his early 30s.

Such potentially high profits soon attracted an eclectic group of producers to the buffalo business.

Marlene Groves, who raises grassfed buffalo near Denver, said a Denver newspaperman told her in the mid-90s that the buffalo industry appeared to be largely made up of “high-rollers and hobbyists” and warned her this was not sustainable.

“Buffalo got caught up in the whole Western glamour thing,” she said.

“This was an era when every movie star thought they had to have a Western ranch.”

The entrance of television mogul, Ted Turner, into buffalo really turned up the heat on female prices as everyone respected his business acumen.

Groves said at its apex the industry got into a civil war between the larger players who wanted to replicate the beef production model of feedlotting and smaller producers who wanted a grassfed production model.

Dave Hutchinson, an organic grassfed buffalo producer from Rose, Nebraska, said when Ted Turner decided to go grainfed it doomed the industry as everyone was following him.

“The product just wasn’t different enough without the grass feeding,” he said.

“We had a perfect health story and everything going our way and we just blew it.”

Peterson said another important point to keep in mind was that the high point in buffalo occurred at the low point in the cattle cycle when beef prices were at the bottom.

“That’s when unsophisticated people are the most susceptible to hype,” he said.

However, Peterson said he never got taken in by the hype and always kept a damp finger to the wind.

“Whenever you see females selling for considerably more than male slaughter animals you know you have a problem coming down the road,” he said.

Peterson liquidated almost all of his buffalo in 1998 and 1999 and thereby missed the 2000 price collapse.

“We proved that you can always breed animals faster than you can build a market for the meat.

“What was so sad was that most buffalo producers never were interested in building a market for their meat until it wasn’t worth anything. They were totally passive during the whole high priced period.”

HAMBURGER WAS THE TRIGGER

He said the “trigger” for the price collapse was that the North American Bison Co-op could not sell their meat trim (hamburger) at a price that reflected what was being paid for seedstock animals.

“The whole problem with a co-op is that they aren’t always run as a business. They didn’t want their trim problem to hurt (live animal) prices and so they just let it build up and build up in storage.

“They kept prices artificially high for too long trying not to hurt their rancher members. Eventually, they had to sell most of it to the government in a bailout.”

Of course, this bad news totally collapsed the seedstock and replacement female market and sent most of the high rollers heading for the exits.

Dave Hutchinson said this sudden collapse in female prices caught most producers totally unaware, even producers like himself, who had their own direct marketed meat program.

“If you were selling a hundred head a year and 80 of them were going as replacements and 20 were for meat, you suddenly had to find a meat market for the other 80. You just couldn’t do that overnight,” he said.

Peterson said that this oversupply problem was worsened by abattoirs who bailed out on the industry once it turned unprofitable.

“They all went back to killing beef cattle. We didn’t have an infrastructure that would keep killing animals at a loss because they had no alternative. This made it very hard to clear the market.”

This marketing turmoil was worsened by the drought of 2006 and the severe winter of 2007.

“When it came down to where you had to get serious or get out, most just got out,” Groves said.

ADVICE FROM THE SURVIVORS

Marlene Groves’ advice to niche meat marketers is to stay vigilant and stay 100% grassfed. She said 100% grassfed buffalo meat prices never fell like the grainfed product did.

“You need some sort of business plan about what you are doing,” she said.

“Don’t produce anything just because it is fashionable and don’t rely completely on other people for a market.

“You have to be willing to carve out a market just for yourself.”

Dave Hutchinson said his goal since the price collapse has been to build a “bomb-proof” business and he has diversified into grassfed beef, goats and organic wheat as well as buffalo.

“I was able to raise the price of my buffalo meat twice during the price collapse because I had my own customers.”

He direct markets over 90% of his production now even though wholesale sales were much easier.

“You have to build a strong personal consumer base and that takes time. Don’t get in a hurry and never short meat quality for quantity production.

“We need to keep pushing the health angle. We have to sell our meats as health food in order to maintain our price margins,” he said.

Both Groves and Hutchinson sell through the Internet and direct to consumers in the Denver market despite their extremely rural locations. Both sell frozen meat and both use USDA inspected abattoirs.

Chad Peterson, ever the margin marketer, said he bought 200 buffalo cows during the price collapse and plans to sell them this summer because prices have greatly improved.

He said knowing that trim (hamburger) is the critical product to sell, he direct markets only hamburger from his culled buffalo cows.

He plans to sell the majority of his grass this year through other people’s cattle via custom grazing and is waiting for clearer signals about the size and direction of the grassfed beef market before making the big plunge.

“My advice is to be really slow about getting on someone else’s bandwagon. Whenever, you hear someone say there’s no way to overproduce something, be very careful!

“I would be particularly wary of(genetically) building a herd of animals that couldn’t be sold into the larger commodity market in a pinch.

“The people who really did well over the course of the whole price cycle were those who were in early and who were fully integrated.

“They could cash in on high female prices as replacements or they could make money selling them for meat.

“You’ve got to have a backup plan. In the end, the only real price insurance is to own your own set of customers.”

Lessons for the Learning

1. Female prices higher than slaughter males indicate trouble brewing.

2. The inability to sell trim (hamburger) is a sign of impending price collapse.

3. Be wary of products using a borrowed infrastructure.

4. The only true price insurance is direct marketing.

© by The Stockman Grass Farmer

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