BANFF, Alta. – A North American beef industry expert predicts tumultuous changes in the sector, driven by a mix of volatile politics, consumer tastes and health concerns, environmental worries and competition for retail sales.
Steve Kay, publisher of Cattle Buyers Weekly, has watched the North American industry for nearly two decades.
During his speech at the Alberta Cattle Feeders Association convention in Banff, he listed eight trends producers should note:
- The switch from old to new beef.
Changing consumer preferences are driving this change. Beef is no longer sold only as generic beef. More brand-name products with improved quality exist today. And consumers seem to like it. They are buying more beef at higher prices, which translates into renewed demand. However, there are rumblings in the United States that overall domestic and export demand slipped by 1.3 percent between 2000 and 2001 and another 1.5 percent between 2001 and 2002.
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- The movement from commodity to beef labelled or sold under a specific brand to meet certain specifications or serve a niche market.
More than 1,500 new beef products have been introduced in the last five years offering ready-to-eat meals, snack foods and case-ready items.
“It is starting in a small way to boost retail sales,” Kay said.
More certified beef programs, which prominently feature breeds as a brand-name label, have emerged. The most obvious is Certified Angus beef, which sells about 540 million pounds per year. Branded products offer consistency and build customer loyalty.
- Retail consolidation.
In Canada, the top five retail chains control 80 percent of grocery sales. In the U.S., the top five chains control 50 percent of sales. Wal-Mart is the fastest growing chain with food sales of $39 billion US in 2002. Its aggressive price discounts have sparked price wars and more pressure is exerted on suppliers and meat companies to give Wal-Mart the prices and carcass specifications it wants.
- Black is beautiful.
Angus has become the preferred breed.
About 12 million Black Angus move annually through the North American system. About two million are good enough to be certified.
- Food safety, animal welfare and controversy over hormone implants.
Foreign animal diseases are a threat and tremendous resources are directed toward eradicating the potentially deadly bacteria E. coli 0157:H7.
Fast food restaurants and retail buyers are forcing more humane animal care.
Kay expects the debate over hormone implants to continue. North American producers argue they are safe, but there is a small but growing number of groups offering hormone-free beef.
Kay predicted a rise in the demand for natural beef. Some studies suggest more consumers prefer beef without hormones because they believe it is healthier. Other studies have linked implants to beef toughness.
“There is some justification to take a hard look at the practice,” he said.
- New environmental rules and conflicts over water.
Environmental pressures on expanding and new cattle operations continue. Water will be the big issue, Kay predicted. Lack of adequate water supplies in some countries or regions of Canada could constrain cattle feeding operations.
- Emergence of Brazil.
The country aims to produce 200 million cattle by 2005. Last year, Brazil exported 910,000 tonnes of grass-fed beef that sells for less than grain-fed beef.
- Country-of-origin labelling in the U.S.
The pending legislation will change the nature of the industry and could cost the American industry $2 billion US annually in record keeping, inspections and segregation of foreign products, he said. It could cost Canada $300 million Cdn annually in lost sales. The U.S. may send fewer cattle to Alberta for feeding. Trade challenges cannot be launched until the legislation is mandatory in 2004.
Kay predicted the mandatory country-of-origin labelling legislation will be postponed because the U.S. Department of Agriculture cannot write all the regulations by the Oct.1, 2004, deadline.
