Division of Agricultural Sciences and Natural Resources • Oklahoma State UniversityAGEC-614Oklahoma Cooperative Extension Fact Sheets are also available on our website at: http://osufacts.okstate.eduOklahoma Cooperative Extension ServiceClement E. WardProfessor EmeritusKellie Curry RaperAssociate Professor and Extension Economist Research completed at Oklahoma State University in 1999, led to an Extension fact sheet on beef industry alliances. Since then, other studies have been completed, and several more years of data are available on various aspects of alliances in the beef industry. This fact sheet updates much of what is available about beef industry alliances. Specifically, it addresses the extent of alliances, motivation for using them, common characteristics of many, what producers may have to do to participate in them, and evidence of their success and impact. As with the earlier fact sheet, an important source of informa-tion is Beef magazine’s annual list of alliances, referred to as the “Alliance Yellow Pages” (available at http://beefmagazine.com/markets/alliance-yellow-pages/). This annual list has enabled tracking and assessing selected aspects of alliances over time.Alliance Definitionand Essential Components There is not a universally agreed upon definition of an alliance or the essential components of an alliance. Here, it is assumed an alliance consists of two or more firms in adjacent stages of the vertical cattle or beef supply chain, which is from cow-calf produc-ers to retail or food service distributors, who agree to cooperate for their mutual benefit. Each entity remains independent, but they share information necessary to jointly coordinate the flow of cattle and beef between sellers and buyers. Some firms or organizations call their coordinated effort an alliance or strategic alliance, but others may refer to themselves as a partnership, cooperative or program. More important than the term used to describe their organization is what these ar-rangements are attempting to accomplish jointly for their mutual benefit and how they do it. Several efforts have been made to place alliances into dis-tinct categories. Two such efforts are similar: relationship-based alliances versus equity-based alliances (Mulroney and Chaddad, 2005); and equity and non-equity alliances (Schroeder and Kovanda 2003). In both cases, equity-based alliances require a substantial investment in physical facilities or management. Participants have an investment stake in the success of the alli-ance organization. Some would argue the investment requirement increases the commitment by participating individuals and firms. Non-equity alliances typically only require a fee, usually on a per-head basis for services provided by the alliance organization. Relationship-based alliances and non-equity alliances are similar in organization and operation. They focus on developing relation-ships, which improve vertical coordination among supply chain firms. Coordination is improved by the exchange of information, which enables matching quality, quantity, time, and location of the physical movement of cattle and beef through the supply chain. Extent of Beef Industry Alliances The decade of the 1990s was a major development period for beef industry alliances. About two-thirds of those operating in 2008, and reported by Beef magazine, were organized in the 1990s. The earliest alliance in the Beef magazine list for 2008 dates back to 1978, and the most recent alliance on the list was organized in 2004. No reliable data exists on the volume of cattle marketed through alliance-type programs. Using Beef magazine’s annual list, about 3.3 million cattle were marketed through alliances in 2000 and that number has increased to nearly 4 million head based on the 2008 data. Again, it should be noted these are rough estimates. However, it suggests 15 percent or more of fed cattle that are marketed annually pass through some type of alliance organization. Some alliances are quite small and primarily local in nature, while others involve large cattle operations and are national in scope. Most published lists by magazines or industry groups fail to account for the many local community or county alliances that exist throughout the U.S. These smaller, more localized alliances may consist of several beef producers providing beef to local res-taurants, retail grocers or directly to consumers. While each such alliance may not be large based on either number of producers or number of cattle, they can have a positive influence on the local demand for beef, beef quality and producer returns.Motives for Alliances The motivation for organizing alliances varies and involves industrywide motives in some cases and individual producer or company motives in others. Industrywide, alliances are thought to help reduce a two-decade decline in U.S. beef demand by enabling producers to respond better and more quickly to changes in beef demand. This could be accomplished by sharing informa-tion between supply chain participants, which is from cow-calf producers to retailers; also by relying less on market prices to signal demand changes from consumers to retailers, packers, cattle feeders and cow-calf producers. Alliances have the potential to reduce the segmentation and adversarial relationships between buyers and sellers in each of the supply chain stages, thereby creating a more cooperative atmosphere. A part of improving beef demand is having beef compete more effectively with pork and poultry. It is thought alliances could facilitate a move to value-based marketing where producers would receive prices that matched the quality and consistency of what they brought to the marketplace. Some producers have long thought they have superior genetics and produce superior beef products. Alliances could enable them to be rewarded for Update on BeefIndustry AlliancesAGEC-614-2those superior product characteristics. As a result, the quality of beef products would increase and the consistency of higher quality beef products would improve. For producers, the bottom line from the expected improve-ments in beef demand and increased competitiveness with other proteins is increased profits. Improved profitability may occur through premium prices, reduced risks and reduced costs of producing and marketing cattle and beef products in an alliance framework. Research suggests the number one motive for joining an alliance is