Industry Updates

Meat Market
BOOMING

By Julie Stepanek Shiflett, Ph.D.
 for the American Boer Goat Association
Reprinted from The BOER Goat pages 14-16 November/December 2007 issue

The commercial meat market in the United States is booming. Over the last two decades, the industry has changed from a net exporter to a net importer, goat weights have increased with changes in breeding, and goat—a staple of ethnic cuisine — is increasingly featured in fine-dining establishments. The U.S. meat goat industry is poised for continued profitable investment in inventory and market development.

Since 1995, the number of goats slaughtered has increased an average 6 percent per year.1 In 2006, 581,743 head of goat were slaughtered, up 51 percent in ten years. At an estimated 40 pounds of meat per goat, domestic production totaled 23.3 million pounds in 2006 (Figure 1).2 Over the same period, 24.4 mill. pounds of goat meat were imported. Thus, an estimated 47.7 mill. pounds of goat were consumed in 2006.

In the last 15 years, goat imports increased an average 16 percent annually. In 2006, 11,000 tons of goat, valued at nearly $41 million, was imported.3 In the five years, 2002 to 2006, an average of 94 percent of imported goat meat came from Australia, while the other six percent came from New Zealand.4 The fact that it is profitable for U.S. importers to ship goat meat from the other side of the world is a testament of the strength of the goat market in the United States.

Figure 1. Estimated Domestic Production
and Imported Goat Meat
Source: USDA/AMS, Dept. of Commerce, Shiflett

The Commercial Meat Market

While a lot of goats sell direct from the farm to individuals, butcher shops, or restaurants, it is hypothesized that most goats sell through auctions. Producers take goats to auctions where buyers will fill orders for wholesalers, retailers and individuals. The two largest goat auctions in this country are held in San Angelo, Texas and New Holland, Pennsylvania.

Packer buyers in Texas may haul a load of goats to Florida or to the Northeast for slaughter in small packing plants for small grocers or for individuals. Often one buyer will fill a trailer with an odd assortment of little kids, big kids, thin nannies, or fat nannies to fill customers’ unique orders. It is profitable to haul goats 35 hours across the United States because many goat consumers set a premium on fresh and/or live goat. According to some customs, a ceremonious slaughter before goat is served as equally as important as the meat.

While the San Angelo market caters to ethnic groups from Iranians, Turkish, Indian to Hispanic, the New Holland market primarily caters to the myriad of non-Hispanic ethnic groups on the East coast. Goats from San Angelo are transported all over the country, but mostly to the Northeast.

Auctions in both New Holland and San Angelo sell goats of all classes, from 20-pound kids to 250-pounds bucks and nannies. Although seasonal demand is present, Taylor Cox, USDA Market News Reporter in New Holland, remarked, “There is a demand for everything!”5 There are a handful of buyers in each market week-to-week with orders often for over 1,000 head. With 2,000 head to 8,000 head of goats selling each week, San Angelo offers buyers a sizeable selection of goats.

The success of the commercial market depends largely upon traits generated from the pure breed Boer goat industry. Although a variety of breeds sell at auction, Boer goats and Boer Crosses are particularly popular because they typically grade Selection 1, which means they have a high ratio of meat to bone. Boer goats are often crossbred with other meat goats to specifically enhance carcass quality by adding some muscling. Selection 1 goats are thickly muscled throughout the body, with a bulging outside leg, a rounded loin, and a thick outside shoulder.6

Reproductive performance is also important to the meat goat industry. The profitability of a meat goat enterprise will improve if the costs are kept low and nannies are productive and kids survive.7 Benny Cox, Sheep and Goat Sales Manager at Producers Livestock Auction Co. in San Angelo, commented, “When Boer goats were introduced in Texas there was a lot of skepticism, but people soon understood that the Boers were beneficial to the meat market because they added weight to kids and their survivability was satisfactory.”8

Meat Prices Remain Strong

Meat goat prices have been rising over the past five years at auctions in New Holland and San Angelo. In San Angelo, prices for Selection 1 kids, ranging from 20 pounds to 100 pounds were averaging around $100 per hundredweight (cwt.) in early 2002 (Figure 2). Five years later in early 2007, kids were worth around $125/cwt.

Figure 2. Buck and Kid Prices,
San Antonio, Texas, Selection 1
Source: USDA/AMS, Shiflett

13Telephone conservation with Rebecca Sauder, USDA Market News Reporter, San Angelo, TX, 7/12/07

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The Demand for Goat Meat Outstrips Supply

University of Maryland, Meat Goat Production

Goats, one of the earliest animals to be domesticiated, are underrated as farm livestock.  Goat meat is a preferred protein source in many parts of the world.  Globally, more people probably eat dairy goat products than dairy cow products.  An important source of fiber and skins, goats are often used to control unwanted vegetation.  They’ve even been used as pack animals.

Traditionally, most fiber and meat goats have been raised in Texas and the Southeast.  Recently, however, the number of goats being raised for meat throught the United States has increased.

The U.S. Department of Agriculture estimates the meat-goat industry is growing by 10-15 percent a year.  Domoestic production of goat meat can’t meet the current demand.  Much of this demand is met by importing goat meat from Australia.

Changing immigration patterns and population demographics have increased demand for goat meat.  Muslims, Hispanics, and Caribbean islanders are among the largest goat-meat consumers.  The importation and subsequent integration of the South African Boer Goat has a had a large impact on the U.S. meat-goat industry. Especially the Mid Atlantic region close to the Washing, DC, New York and New Jersey markets.
 

 Marketing

The meat-goat industry is built almost entirely around ethnic demand from religious
and social traditions of people who have immigrated to the United States, particularly
recently. In addition, some U.S. natives have converted to religions that favor goat meat.To the astute livestock producer/marketer, marketing means more than just selling. Astute marketing involves the entire planning process required to produce, promote or merchandise and price a commodity.

The first step in the marketing process is producing the type of stock - hogs, beef cattle, or sheep - that the livestock producer wants to produce. Of course, though, the producer must produce the kind of animals that the market place wants. It is often a costly lesson to produce an animal that the market place doesn’t particularly want.

Other essential components of the production and marketing process include: estimating production costs, calculating cash flow needs, knowing what type and quality of animal has been produced and which buyers will be interested in that type of animal. A final, and equally important, step in the plan is evaluating the pricing and delivery alternatives.

Once the final sale has been made, it’s very important to review the marketing process to determine what worked well and what needs to be improved.

This module outlines how the marketing process can be organized into a number of very logical steps. The “Livestock Marketing” section of the marketing manual contains relevant modules that focus on these individual marketing steps in more detail.

Steps to Livestock Marketing Success

1. Estimate costs
The first step involves accurately estimating costs of production and cash flow needs. This step is listed first because it is vitally import. Even though figuring costs and cash flow needs can be done at any time, it really is best to complete this step as early as possible.

By estimating both production costs and cash flow requirements, a producer can decide what type of animal to produce and when it will have to be sold to meet payment schedules. These estimates, along with price forecasts, should be used to determine how the animal will be marketed.

1. A producer who knows his or her past production costs and future price forecasts, can also determine when to retain female stock for breeding expansion or when to cull more heavily. Breakevens or production cost estimates are critical in setting a series of target prices that should be watched for in the changing market.

2. Gather market information, including market outlook
Following market trends and projected livestock prices helps a livestock producer decide what to produce in order to bring the greatest return. For example, deciding whether to sell weaned calves, yearlings or slaughter cattle depends upon the market outlook for each of these animals. A producer may follow the United States market for price signals that may relate to our market. By following the U.S. market, a producer may detect a market trend or even identify an export opportunity to a US market. For example, a decision could be made to finish animals to specifications required by an American buyer.

3. Know your product
The quality and type of livestock for sale must be assessed before a producer can seriously evaluate the various pricing and delivery alternatives. A producer that knows exactly what kind and quality of animal he or she has for sale, can contact buyers with the information they need. If there are premiums offered in the market for your type of cattle or other livestock, you will be better able to capitalize on them.

Knowing your product also involves presenting them favourably. Sorting animals into lots of similar size and weight will make them more attractive to buyers. Selling clean and healthy animals helps in reassuring buyers they are paying for a quality product.

4. Set several target prices
Setting target prices is a big help in making livestock marketing decisions. However, a livestock producer can only set target prices by knowing actual or accurately estimated production costs. A marketer must also know what the market is paying, or is expected to pay. The level and timing of these target prices should be set based on quality market outlook information, cost of production figures and cash flow needs rather than expected profit levels. The advantage of setting several target prices rather than just one price allows a producer room to respond to changing market trends. Staying in touch with the market is crucial when trying to hit a target price.

5. Evaluate pricing and delivery alternatives
Producers should evaluate all available alternatives for pricing and delivering their livestock. Each alternative has specific features that may make it more suitable than another in certain circumstances.

There are several livestock pricing choices available for any strategy. A forward contract offers a producer an opportunity to lock in a price for his livestock ahead of an expected sale date. Other alternatives are available for pricing livestock. They include open bids at auction markets, producer or breed association sales, video auctions, satellite and internet auctions, direct sales to packers, sales to livestock order buyers or using the futures market and a hedging strategy. Producers should keep their target prices in mind as they consider each pricing alternative.

There are a variety of pricing methods for the market delivery alternatives listed above. These pricing methods determine such things as whether an animal is sold live or rail graded and whether it is sold with a pencil shrink or not. All aspects of a pricing agreement will have a direct influence on the final return a producer receives.

When evaluating marketing alternatives, producers should keep in mind how their animals will be delivered to the buyer and if this delivery method will influence the settlement price. The method of transport includes both the operating costs of the truck and the costs of lost weight or quality of the animals. These factors should be considered as producers decide how and where to have their livestock priced. Pricing and delivery decisions are typically made together when selling. The pricing decision will sometimes dictate what the delivery method will be. However, both pricing and delivery methods can often be negotiated when reaching a settlement price with a buyer. A producer, who knows production costs and cash flow needs, can better determine if the price being negotiated is suitable for the producer’s business needs or personal profit goals. A producer, who knows current market conditions, can better determine if an offered price is reasonable for current conditions.

6. Stick to your plan
A livestock marketing plan involves all the steps listed above. Producers, who follow these steps, will have a thorough understanding of how their business is functioning. They will also have the confidence to stick to their plan as they watch the market change daily. Changing plans on the spur of the moment can be as bad as having no plan at all.

7. Evaluate your plan
All plans must be evaluated to determine what worked and what needs be improved on in the future. The need for evaluation also applies to the seven-step marketing plan. A producer, who looks back on livestock sales and how the returns received matched the needs of a business, will continue to learn more about what factors influence his operation. This learning process will provide opportunity for growth in the future.

Marketing is more than just selling. For your farm to be a successful business, it must include marketing as part of the overall farm management operation.

Also Consider This...

The largest goat-consuming ethnic populations in the U.S. are Hispanics, Muslims,
and Caribbean islanders. Population groups may prefer different types and weights of
goats. Hispanics tend to prefer young, lightweight kids (20–40 lb), Muslims tend to
want a heavier kid (60–80 lb), and Caribbean Islanders prefer mature bucks. Most consumers prefer lean goat meat.

Target a specific consumer market and familiarize yourself with its customs, holidays,
and preferences. Then produce a goat or goat meat product that meets those
demands. Some ethnic groups may also want the goat fed and processed in a specific way.

In addition to ethnic markets, two other potential niche markets for goats are:

1) markets serving health-conscience consumers (goat meat is low in saturated fat),

2) restaurants that feature ethnic foods or goat meat as a gourmet food. Though
these markets are largely untapped, they present a challenge: average Americans of
Northern European descent usually don’t eat goat meat.

A high percentage of meat-goat sales are made at the farm gate; most of the rest take place at public livestock auctions. Unlike other livestock, goats are generally sold by the head, ungraded. However, efforts are being made to change these practices.
In Spanish, goat meat is called cabrito, which typically refers to meat from a young
goat. Chevon, the French word for goat meat, usually indicates a larger kid goat.

Texans commonly call a meat-goat kid a mutton, not to be confused with meat from
a sheep older than a year. In the meat-goat industry, does are called nannies and bucks are billies. These are common terms used in the marketplace and by producers.