Less demand for quality cuts | The cattle industry needs to adjust feeding regime to stay profitable
NASHVILLE, Tenn. — A quick glance in the average shopper’s grocery cart is likely to show more hamburger and fewer steaks.
That change in consumer choice should encourage the beef industry to rethink the kind of products being offered, said an agricultural economist with Rabobank International.
“We are seeing a growing imbalance between what consumers are showing us they want to buy and what the beef industry is producing,” said Don Close, who authored a Rabobank report on the beef industry, which was released at the National Cattlemen’s Beef Association convention in Nashville Feb. 4.
The industry used to encourage producers to aim high and produce better quality beef, and they succeeded. The number of carcasses grading USDA Choice or Prime has increased by 20 percent in the last 10 years.
However, it may not be what consumers are looking for. Consumption has dropped to about 55 pounds per capita from 90 lb. 30 years ago.
“If it was quality alone, we would not continue to see that erosion in per capita consumption,” Close said.
However, consumption might have dropped even further if quality had not improved, he added.
Close said 60 percent of beef consumption is ground product, even though the industry continues to focus on high grade muscle cuts.
Retail prices for all meat soared from 2000-13: broiler prices by 24 percent, pork by 45 percent and Choice grade beef by 72 percent.
At the same time, the price of a package of hamburger has been closing in on the Choice cuts.
“All beef prices have escalated at a faster rate than Choice beef prices. That gives us very compelling evidence that consumers have downgraded the items they are buying,” he said.
“We will see additional price narrowing between these two items.”
Hamburger is not an inferior product, he added. It comprises lower priced components such as beef trimmings as well as cow and bull meat.
Trimmings have been trading at a premium to the overall cutout because of higher consumer demand for the ground product.
Also, consumers are looking for ground beef at 93 percent lean with seven percent fat rather than a lean to fat ratio of 85-15.
Close said more muscle cuts should be ground because fewer cows are going to slaughter and less lean meat is available from suppliers such as Australia.
The Australian herd has been declining because of drought, which resulted in the biggest cow slaughter in 34 years. However, it is a sellers’ market, and cow beef has found more value in China.
Close said Australian exports directly to China increased by 635 percent last year. This trade pattern is only going to grow, he added.
Mexico is in transition and is developing a feeding and processing facility that can handle 250,000 cattle in Durango.
There will be fewer live cattle coming into the U.S. as a result.
In December, the U.S. Department of Agriculture circulated a proposal to accept fresh beef from Brazil with shipments possible by mid-2014. Foot-and-mouth disease outbreaks had previously required Brazilian beef entering the United States to be cooked.
Convenience is another reason for the growth in the grind.
Close estimated that 75 percent of consumers have no meal plans at the end of the working day. Hamburger is easy and can be turned into a meal in 30 minutes.
There is also a decline in cooking skills among young people, who can handle ground beef with more confidence. As a result, more grinding meat will have to come from the fed steer and heifer supply.
The industry needs to select the bottom half and change the way those cattle are fed for market. They could be left on forage longer or given lower quality feed for a longer period. The ribs and loins could be sold to retail as low Choice and the rest ground.
Close said implementing such a program could be best handled at the regional level, where plants are looking for supply so they can stay open.