Vertical Integration isn't a Bad Thing

By Jennifer Hill

Amid all of the infighting over what to do about market disparity within the cattle industry there’s been a real push to turn the concept of vertical integration into dirty no-no words. The idea that all vertical integration is bad, or dangerous to ranchers is nonsense and will only serve to keep the American cattle rancher down. Instead of crying into your Natty Light while you choke down another doom and gloom cattle market video, why not focus on ways to vertically integrate and improve your own operation?

Now before anyone has the chance to go all Cowgirl Karen on me, yes I realize that there’s been some talk about retailers such as Walmart vertically integrating as far down the supply chain as they can and I fully understand why that can and should scare us. The idea of ranchers giving up independence to grow for corporate operators such as Walmart seems the antithesis of what cowboys stand for. However, if a rancher choses to make that voluntary relationship, while not my cup of tea, I can understand their desire to have a concrete plan and market to sell into, especially given the current state of our economy. I also know that with a packer market as consolidated as ours is, any time a packer makes a move to take on downstream ownership it should raise some red flags. But while we’re busy fighting the good fight against packer monopolies perhaps we should focus some time and energy on shoring up our own operations and, dare I say it, vertically integrating where we can in order to make our ranches more self-sufficient and impervious to market manipulation.

Vertical integration on small and medium sized operations can take many forms. In our operation in the last few years we have made an effort to look both up and downstream. We started by retaining an increasing number calves through the feed yard each year. Start small, only holding onto the ones you know you can wait for income from. If that’s a challenge reach out to your local feedyard, many of them offer different options for ownership and risk. We also purchased irrigated ground to grow our own hay. While it may come as a surprise to ranchers in the Midwest, there are plenty of cattle operations out west that don’t have the water resources to produce their own hay. With feed prices on a continuous rollercoaster, owning the means of hay production seemed a viable strategy to find some stability. Lastly, we dipped our toes into the direct to consumer marketing game. We started small, only selling a few head as whole and half beef but eventually branched out into selling hundreds of pounds of ground beef each month and never having enough whole beef to meet the demand. While it does require more work and planning on our part, the reward was substantial enough that we kept with it, growing our home feeding operation to try and better meet demand. Did it drastically change our bottom line? No. But in times like these we’d be foolish to turn our nose up to any additional revenue streams.

The reason big corporate agriculture is always making moves towards vertical integration is because it offers insulation from market fluctuations and the ability to better control your product. It’s sound business sense and if we want the independent, family owned operations in our industry to survive we just might have to start to think a bit like them. Sure, it’s easy to focus our energy on worrying about what big corporate agriculture is doing, but what could your operation accomplish if you focused inward, thought outside of the box and took a small step towards vertical integration?