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When a business is able to sustain profits that substantially exceed the average for its industry, that business is said to have a competitive advantage. We firmly believe having a competitive advantage will be the difference between mere survival and true success in the future of the cow-calf business. There is no reason you cannot have a competitive advantage – if you want one. It is up to you! There are two primary types of competitive advantages – a cost advantage and a differential advantage.
A cost advantage exists when a business is able to deliver the same product as competitors but at a much lower cost. This requires a low cost of production. Low-input cow-calf producers, for example, have a big competitive advantage over status quo producers. Many (perhaps most) PCC customers have a cost of production that is less than half what the national average is. That’s an advantage of $300 to $400 per calf. WOW! The easiest money you will ever make is the money you don’t spend.
Having a cost advantage will only be possible for those who focus on production per acre – instead of production per cow. I personally know several producers who have increased pounds and profit per acre by 50 to well over 200 percent. These producers have implemented proper grazing management to make the most of every ray of sunshine and drop of rain that falls on the land they control. They also produce smaller, more efficient cattle that fit their environment – instead of artificially changing the environment to fit their cattle.
A differential advantage is created when a product differs from competing products and is perceived to be superior to competing products. Many PCC customers, for example, produce and market grass-finished beef. While the demand for conventional beef has been steadily declining, the demand for grass-finished beef has been increasing by leaps and bounds. Producers with grass-efficient genetics are receiving huge premiums for their calves.
Many PCC customers have both a cost advantage and a differential advantage. They produce beef for substantially less than everyone else and they sell it for substantially more than everyone else. These producers are my heroes! As time goes on, they will be buying out more and more of their neighbors. That’s a little sad – but I don’t have much sympathy for people who are too lazy and/or too afraid to think for themselves.