Very well written, Joshua. Thank you.

One definition of a "commodity" from a quick google search:

commodity - definition of commodity - A physical substance, such as food, grains, and metals, which is interchangeable with another product of the same type

If we accept this definition then commodity beef is interchangeable with any other commodity beef. The only difference between them is cost. So buyers of commodities which are interchangeable will always buy the lowest cost.  And the only folks making any money selling commodities are the lowest cost producers who can sell at the lowest market prices and still stay in business...at least for a while.

The other way to go in about any business is to not sell a "commodity" which is interchangeable with others. Selling a product which is "differentiated" or different in the customers mind and worth paying a bit higher price than the "commodity" price.

Nothing new about this. Been taught in marketing and business classes for many years.

For the small beef producer he has two choices: he can either sell on the commodity markets and take the commodity price or he can sell a differentiated product at a higher price.

Selling a commodity has certain advantages in that you can sell at about any time and in many places with very low selling costs. You basically take your cattle to the sale barn and receive what the commodity buyers are willing to pay that day. Smaller producers can do things to lower costs of production such as pooling animals to make a truckload, sorting animals, etc.

Smaller producers can start trying to differentiate their products by using source and age verified programs or pre conditioning programs. These may at least partially differentiate one's cattle from the commodity cattle. However as more and more producers do the same thing these items are less and less a differentiation point. 

A producer may have to do theses programs just to stay with the "commodity" markets. Same thing with other technologies such as implants, rations, etc. As the lowest cost producers use these to reduce their breakeven points, the commodity price goes down to match so to be a lowest cost producer you must use every idea that comes down the road to lower costs.

Other ways of trying to produce and sell a differentiated, NON-commodity product however are not easy and take other skills and incur other costs. It is not as easy as it may sound.

In the end both the commodity producers and the differentiated producers need to keep costs and prices as low as the competition, wherever that competition comes from. I see just like in other product categories, lower cost foreign beef carcasses being brought into this country from areas with lower labor and other costs, inspected at US plants and sold as USDA beef even though the animal never took one step on US soil.

The other thing that affects prices received is supply and demand. Even commodity beef will go up in price if there is more demand than supply. Conversely the commodity price will drop if there is excess supply compared to demand.

This is all nothing new. We all look for the cheapest hamburger or steak, of an acceptable quality level, when we are buyers.   The idea of the small guy going for niche and theoretically more profitable markets sounds much better and easier than it is in practice.

All of us need to keep our costs of production less than what our market, whichever market that is, will pay by enough profit margin to allow us to do this again next year.  jmho.

Jim at Dawn