Study of Grass-Fed Beef in Northern New Mexico

The Taos Community Foundation (TCF) is responding to a growing community desire to develop the local grass fed beef (GFB) sector in the region in response to both perceived market opportunity as well as a desire to create economic opportunity in the traditional ranching sector in Northern New Mexico that keeps families on the land. Consequently, the TCF has raised funds to undertake an objective and independent assessment of the opportunity, in order to provide a realistic and practical basis for investment in the sector.

The study was conducted by AISDevelopment, a Taos-based economic development consulting firm, employing Value Chain Analysis methodology. The methodology offers a straightforward and objective analytical tool for assessing key market actors, their roles and interrelationships, competitiveness and incentives vis a vis specific market opportunity, in this case, grass fed beef (GFB). A value chain is defined as “the full range of activities and services of market actors required to bring a product or service from its conception to its end use and beyond.” The approach moves away from a singular focus on producers to a holistic understanding of the value chain in which they operate vis a vis their target market. The approach provides an understanding of the competitive requirements and “success factors” of the target markets and, based on that, evaluates the constraints and opportunities currently faced by value chain members in capturing it, resulting in a set of recommendations for actions that will position the region to create commercially viable opportunities.

KEY FINDINGS: The key finding of the value chain analysis is that the competitive constraints facing North Central New Mexico and the San Luis Valley (NCNM/SLV) will make it difficult for most ranchers in the region to produce a commercial grass fed/grass finished product that is a) competitive with current natural/grain finished and grass fed/grass finished beef suppliers in terms of quality and price, even in the local market, and that b) is profitable for producers. The main challenge is the cost of production and lower productivity due to the environmental context of the region. Current economic conditions affecting both consumer behavior and production costs, are not favorable to either of these factors.

STRATEGIC RECOMMENDATIONS: Based on the analysis, we conclude that there are three options for NCNM/SLV producers and stakeholders:

1. Small scale direct marketing, for producers who do not want to expand beyond 10-20 animals finished each fall
2. Participate as a supplier to existing value chains, such as Country Natural Beef
3. Find a buyer serving the local/regional market who will buy the whole carcass and work with a group of producers to develop a local (New Mexico) value chain

In order to implement the third option, we propose the following set of strategic recommendations:

1. Develop a “line” of natural products, with GFB that meets both the USDA and American Grassfed Association (AGA) standards as a super-premium product with the highest premiums. Along side the super premium product, develop other beef products that answer to other premium standards, and do the same with pork and poultry.
2. Establish standards for breeds and feed to improve productivity and ensure consistent quality in finished animals. Establish standards and third party verification for health (no anti-biotics, no hormones), environmental sustainability, and animal welfare (including handling, transport, and other “quality of life” issues).
3. Develop a New Mexico brand differentiated on the “story.”
4. Develop alliances with southern producers and producers in surrounding states to expand the supply base to include locales that can contribute to year around supply, and to improve economies of scale that allow for specialization—in finishing, processing, aging, and/or marketing—as business opportunities within the value chain.
5. Redefine “local”—Define the local market as at least a 4-hour drive time (300 mile radius) that would include Santa Fe and Albuquerque—markets that are critical to the sustainability of any value added agriculture product in the state—and still garner the “local premium.” Further position the New Mexico brand and product line for export from our immediate area.

PROPOSED INTERVENTIONS. The following interventions are proposed for public sector and donor consideration in order to facilitate private sector development of a specialty beef value chain in New Mexico:

1. Support NMSU Extension research on feed and breeds that are optimized for the New Mexico production context.
2. Implement a demonstration pilot to explore and adapt viable value chain model(s) through stakeholder collaboration, based on a key buyer serving the local market (defined as within New Mexico)
3. Facilitate value chain financing by establishing an Agriculture Competitiveness Incentive Fund (ACIF).
4. Continue value chain research into the feasibility of developing specialized private sector value chain services, including examining both national and international value chains.
5. Support creation of a third party verification program to establish minimum state standards for beef products, including health and nutrition, animal welfare, and environmental sustainability.
6. Develop an on-going market intelligence function to support the value chain.
7. Document the “story” of New Mexico ranching through “oral histories,” in support of cultural preservation and brand development.

FINAL Report GFB-VC

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