Bone-in products are gaining popularity in grocery stores, while fresh beef is considered higher quality than frozen
SAN ANTONIO, Texas —The beef industry’s ultimate goal is to maximize the value of every animal and find buyers for every part of the carcass in domestic and export markets.
A wide ranging study into the vagaries of beef demand was presented at the National Cattlemen’s Beef Association convention held in San Antonio, Texas, Feb. 4-7.
As part of her master’s thesis, Lauren Bell, an agriculture economist with Cargill Protein, interviewed players throughout the beef industry to learn about their challenges and goals.
“This industry is enormously complex,” said Darrell Peel at Oklahoma State University, who worked with Bell.
“We have a diverse set of final markets, final consumers and that ultimately determines value in the industry. Everything that happens from cow-calf level up is based on value coming down from the top,” he said.
Over the last five years the industry expanded and consumption went up but that is not indicative of demand.
When determining demand, economists consider many factors including quantity, price, employment figures and disposable income.
Consumers buy specific beef products in grocery stores or restaurants. Each is a separate demand item and if one is not available, they are likely to substitute it for some other beef product. If they cannot afford steak, they are more likely to substitute it for ground beef, studies show.
More new cuts are available to derive more value whether it is for the domestic or export market.
“In the marketplace there is every incentive for every piece to have value,” he said.
Bell interviewed players across the country to learn what modern consumers are seeking.
She learned bone-in products are gaining popularity in grocery stores. Fresh beef is considered higher quality than frozen.
In the United States, about half of beef consumption is ground meat made from trimmings derived from fed cattle as well as cows, bulls and imported lean trim from places like Australia and New Zealand.
Many think all ground beef comes from cull cows, but the middle meats from mature animals are also used to add value. Cow beef is cheaper and may be found in cruise line or casino buffets or lower value restaurants.
Holstein beef in the market derived from male calves from dairies also has a place.
“When fed correctly, Holsteins actually grade really well. Seventy to 80 percent of Holsteins fed out grade Choice or better and in our Prime supply up to 30 percent of those carcasses may come from Holstein animals,” she said.
“With beta agonists and feeding technology their muscle shape now is similar to a normal fed carcass,” she said.
High-end steak houses will not accept them, however.
The U.S. exported nearly 12 percent of production last year and that adds a new dimension to demand and different customer requirements.
The product mix includes variety meats and middle meats that add value to a carcass.
Asian countries are one of the largest drivers in the export trade. Chuck and short ribs, which have more fat and are well-suited to their cuisine, are popular, but more Asian markets are also importing steak.
Bell also looked at the needs of food service and the retail arena.
She found most casual dining outlets have a standard product mix and set prices on the menu. They want consistency when preparing meals. They generally do not have trained chefs but employ people who follow basic instructions. Further processors send them steaks with the same shape and thickness.
Higher-end steak houses noted about 50 percent of the orders are for tenderloins and are most often ordered by women. The rest is a mixture but there is a growing preference for rib-eyes. There is no explanation for this trend. Bigger carcasses weighing more than 800 pounds are the norm.
There are more pounds to sell but restaurants and retailers have to figure out how to use bigger cuts.
Middle meats are bigger and that causes problems when higher value steaks must be cut thinner to fit a 12-ounce portion size.
“In food service, it is really difficult for them to sell a quality product when they are having to cut it thin. On the retail side, if you think about it, bigger primals are going to weigh more and boxes are going to be heavier. That is difficult for labour,” she said.
Grocery stores find they place fewer packages in the meat case and have to restock more often.
Cutting differently with new ideas like the tomahawk steak medallions are possibilities when dealing with bigger muscle cuts. These also have more value and are popular among consumers.
Better genetics and longer feeding is resulting in improved carcass grades with 80 percent making USDA Choice and Prime. More branded beef programs have emerged and they want upper Choice cuts.
Other trends for the industry include the constant struggle with labour. Within the meat industry there is a 30 to 70 percent turnover. Rural areas struggle to attract workers and companies located close to cities must compete for staff who have more job choices with potentially higher wages.
There is also a situation in which the industry has broken itself down into several specialized sectors.
“Most participants in this industry at the meat level, and it is probably true of the cattle sector, everybody works in a bit of a silo and they work in a small part of the market. Not very many people, including the packers, really understand the totality of this whole situation,” Peel said.