If North Americans eat mostly ground beef, then cattle producers should give them what they want and forget about trying to feed every animal to the top quality grade, a cattle market analyst suggests.
In 1970, ground beef comprised 42 percent of consumption in the Unite d States and by last year that changed to 56 percent. Demand will only increase for the convenient, lower priced product while desire wanes for the middle meats that provide the steaks, said Bill Helming.
A founder of the market analysis agency Cattlefax and former chief economist for the National Cattlemen’s Beef Association, he talked about the stark realities facing the North American beef industry if it does not adopt some new strategies.
Read Also
Saskatchewan, Manitoba sign Arctic Gateway deal
Saskatchewan, Manitoba and Arctic Gateway Group have signed an MOU to strengthen trade through the Port of Churchill.
“The industry is a one trick pony where three ponies are needed,” he said.
Helming believes current economic policies will drive the debt ridden U.S. into a depression within a year or two. Cash strapped consumers are more likely to pay $4 a pound for ground meat versus $12 a pound for a steak, he said at the International Livestock Congress held in Calgary Aug. 10.
“The bottom line is the American domestic consumer demand picture is not pretty,” he said.
About a quarter of ground beef comes from cull cows and dairy animals, 60 percent from fed beef and 15 percent is imported trim. About 45 percent of all fed animals end up as ground beef. These animals could be produced more cheaply if they stayed on grass rather than fed expensive grain.
Helming suggested a three-way scheme.
Cattle destined for the hamburger market should be finished on grass where the cost of production is lower. Another group of plainer type cattle could go into a short-term feeding program of less than 90 days where they receive a forage-based diet and are fed to a slaughter weight of 1,025 to 1,050 pounds. The third group could be the high quality cattle placed on full feed to produce the higher value middle meats.
Producers must find ways to drive down the record cost of production driven by a volatile currency, high feed grain prices and other associated costs to raise cattle. It costs $550 to $560 to maintain a cow and produce a calf in the U.S., he said.
While prices may be hot right now with fed cattle selling for upwards of $120 per hundredweight, within a couple years they will fall back to $85 as the economy flounders.
“The cattle bubble along with the commodity bubble will burst and I think that process has already started. We will see significant air let out of the balloon in the next three to five years,” he said.
Higher prices are partly linked to a short supply of cattle. Rather than expanding to take advantage of higher prices, Helming thinks the herd will decline by at least another three million cows.
At the same time, beef demand has paled against competitors like chicken.
“Contrary to what a lot of people believe, that beef demand is improving, no, it is going south and it has been for the last 45 years,” he said.
Chicken consumption since 1992 has gone up by 25 percent or an extra 45 lb. per capita. Beef has dropped by 37 percent or 35 lb. and pork has gone down by 21 percent or 13 lb. per person.
Current production systems are not sustainable.
There are 750,000 cow-calf producers in the U.S. and the average herd size is 41 cows. It takes 350 to 550 cows to make ends meet.
His research shows 33 percent of the production comes from herds with fewer than 10 cows while 80 percent have fewer than 50 head.
“Those are not economic units. They are hobby farms,” he said.
In addition there is excess feeding and packing capacity developed during a period of cheap feed and energy in Canada and the U.S.
“We have neither one today,” he said.
