Quality puts Canadian beef in hammer seat

RED DEER — The top 10 beef exporters of the world account for 90 percent of the trade, but each services very different markets.

Canada and the United States dominate as the source of quality beef.

Countries such as Brazil and India are major exporters, but that beef is of a different quality and price, Don Close, animal protein analyst for Rabobank’s North America division, said at the Alberta Beef Industry Conference held in Red Deer Feb. 21-23.

“The U.S. and Canada compete with those countries,” he said.

“We have to get over the belief that all beef is equal. It is not. The supplier of quality beef to the world is North America.… We are in an incredibly powerful position.”

He said India exports a product derived from water buffalo called carabeef and recently gained a large quota to Indonesia with its population of 300 million.

Australia used to send large numbers of cattle to be fed and processed in Indonesia, but there has been a shift. Indonesia opened to carabeef from India, offering a quota of 15,000 tonnes. That quota is expected to double this year, and the meat is likely to displace other products.

The product trades at about 70 percent of the value of ground beef and is commonly sold in wet markets at parity to imported beef.

India and Brazil are the top exporters and each sells about 1.8 million tonnes of beef a year.

Australia exports 1.4 million tonnes of beef, which is 65 percent of its total production.

New Zealand ships 65 percent of production, which amounts to about 600,000 tonnes.

Australia may be forced to step up sales because its cattle rearing area is in severe drought. The same situation is occuring in the southwestern United States, and if conditions become drastic there could be a large sell-off of cows, which could end up in the ground beef mix. Seventy-five percent of the U.S. cow herd is thought to reside in the drought regions.

“If we start liquidating U.S. cows on top of Australian cows, I think we could see a lot of pressure on the 90 percent lean trimmings market later this summer,” Close said.

While weather and market volatility are ongoing issues for agriculture, the emergence of online shopping could force unprecedented change to how food is marketed.

The commercial real estate company Cushman and Wakefield is reporting major upheavals in the retail sector.

Nine thousand retail stores closed last year, and the firm forecasts another 11,000 retail stores could shutter.

“There is a lot of discussion that 25 percent of the shopping malls in the U.S. could close in the next five years,” Close said.

The economy is not soft, but the major trend toward online shopping is changing the retail sector.

Companies such as Amazon and Walmart are offering online food sales. Some stores have been converted to warehouses, where customers can pick up their orders.

The online trend is also boosting the growing popularity of meal kits, which sell for an average price of $10 each and can be delivered to the shopper’s home.

“If you think about the old mantra about what makes for successful real estate, it is location, location, location,” he said.

“If you think about consumer activities and trade in the future, the new phrase is convenience, convenience, convenience.”

These packages could have a profound impact on the beef industry.

“A lot of the cuts of beef would be restricted from being offered in meal kits because of price limitations,” he said.

However, with some imagination meal kits could take advantage of new or underused beef cuts that are easy to cook. This kind of convenience may actually get more people eating beef.

Besides convenience, online shopping also offers wider choice.

A typical grocery store is 30,000 to 50,000 sq. feet with about 300,000 different product offers.

Meat inventories are restricted in conventional stores, but online shopping can offer a wider selection of cuts to satisfy those looking for value or ultra high quality. It can also offer more niche products such as grass-fed, hormone free, organic or a broader range of quality grades, which a physical store cannot offer.

“If we go to online shopping, you do not have geographic constraints as to how far you want to drive to that store,” Close said.

“You don’t have the constraints of how many items are available in the store. As big as you want that website is how big the market is.”

This kind of selection could ultimately affect the way cattle are marketed and priced, he added.

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