We’re Ignoring the End User at Our Peril, Says Agricultural Economist

Last week, Eric Micheels, assistant professor in the Agricultural and Resource Economics department at the University of Saskatchewan, tweeted a link to his newly-minted dissertation, entitled Market Orientation in Production Agriculture: Measurement, Relationships and Implications.

Now, normally, the word “dissertation” would do little to pique my interest, but Micheels has been vocal through the Earls debacle, and earlier, with A&W. What I like about his tweets and blog, is that they provide an alternate view to the majority of those in the beef industry. They force you to think outside the box, with poignant questions like: “Would a rancher pay more for a certified bull or just a bull where the owner said, ‘trust me, he’s a fertile one’?

(Read Micheels’ Does Agriculture have an Agricultural Economics Problem? and Assorted thoughts related to #Earls)

So, late last week, I called Micheels to discuss his dissertation, and his thoughts on Earls.

Eric Micheels, associate professor at the University of Saskatchewan.

Eric Micheels, assistant professor at the University of Saskatchewan.

The dissertation, in his words, looks at “the benefits of agricultural producers trying to become more aware of consumer demands for agricultural products”. The research, which focuses on beef production in Illinois, was somewhat surprisingly inspired by the Illinois soybean market.

Micheels told me he was speaking with his advisor at the University of Illinois about food-grade soybeans. In the State, production relies on contracts to specific elevators, and those elevators have particular standards the farmers must strive to meet.

He told me this chain led him to think, ‘could this apply to other agricultural markets?’

Micheels turned his eyes to the beef industry.

The North American beef industry is some movement towards differentiated value chains, with numerous third-party certification bodies to cater to those segregations. They might look at breed characteristics, production practices and/or animal welfare. And producers are taking part in these emerging value chains.

“The economist in me says, ‘well they must have emerged because those producers and those people within those channels thought that those products would better meet the need of a subset of consumers.”

And it seems the producers involved in market-orientation tend to agree. In the over 300 surveys received, the research team “found that those producers who were more market-oriented perceived their performance to be better as a result.”

The producers who were more supply-push oriented, or who were not involved in value chains, responded that their performance “met expectations,” Micheels told me.

But what does this all mean to the writer behind it?

“I think one of the main findings is that we ignore the end user at our peril,” said Micheel. “I guess, if you’re happy with average profits, then you know, keep doing what you’re doing. But, I think there’s an opportunity to meet the needs of consumers.”

I couldn’t help but ask, then, how he felt about the Canadian beef industry’s initial response to Earls, considering the company’s original desire (according to them) was to source “Certified Humane.”

He said he was puzzled.

“Value chains work best when we understand the needs of our buyer, and help our buyer meet the needs of their buyer…For the industry, their buyer is Earls — Earls is their customer. And the industry is essentially telling Earls, ‘your needs don’t matter.'”

Micheels believes that there is some work that could be done on creating and allowing multiple value chains in the industry, to offer different values to a heterogenous consumer base. He also believes there needs to be a greater understanding of other consumers’ purchasing decisions, and that we have to realize that agricultural producers are input-suppliers.

“We have to understand that what we produce, consumers don’t necessarily buy that. They buy the final product and they want to have a connection — they want to understand that farmer, but they also want that farmer to understand them.”

 

Debra Murphy

Debra Murphy is a Field Editor based out of central Alberta, where she never misses a moment to capture with her camera the real beauty of agriculture. Follow her on Twitter @RealAg_Debra

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3 Comments

Colette McLean

I completely disagree with the premise that farmers are ignoring the end user, because their client (the processor) is continually putting pressure on them to meet standards and market requirements. What is most disconcerting is this trend that Earl’s is following which is based on misinformation, and lack of understanding. Their policy is nothing more than a marketing strategy that is manipulating the TRUTH! to try and differentiate themselves from their competitors in the hopes that it will result in more sales. Because they only see farmers as their serfs that must comply instead of PARTNERS in their business efforts, you end up with the controversy they brought onto themselves. Reports indicate that they didn’t even consult with the Canadian Beef producers and if Earl’s had truly investigated this issue as they claim, they would have found that Canadian Farmers are providing a safe and healthy product for consumers. Their so-called brand of “humanely raised” animal is nothing more than marketing spin.

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Viren

I completely agree with Colleen, it’s not that the industry said they don’t care, or that end users values don’t matter. IMO, they said that their values are born out of misinformation. Earls might’ve said that they were only reflecting what their consumers have asked, but they have neglected to research the fact that most consumers either don’t know much about what currently exists or is practiced.
To me, they are just using another label to manufacture their own moral high ground based on misconceptions in the public.

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Shaun Haney

I agree very much with your analysis of the Earls decision. They have admitted as much. Whether their lack or research was intentional or accidental it was still a poor decision.

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