Farming Magazine - April, 2013

FEATURES

The Beef Industry

Not what it used to be
By Dr. John Comerford

If we believe the beef industry and the way we produce beef cattle are the same as they were as little as five years ago, we better think again. The headlines for the industry include allusions to the lowest number of cows, the record price for corn, the record price for fed cattle, the lowest feeding profits in six months, drought conditions continuing into the third year, the need to double food production in 25 years, and more. This is the new beef industry, with higher costs, higher prices and an uncertain future. Change is on the horizon.

It will take at least four years to change the trend in cow numbers in the breeding
herd, but that result is contingent upon the availability of grazing-which will be
affected by both drought and available acreage.

It will take at least four years to change the trend in cow numbers in the breeding herd, but that result is contingent upon the availability of grazing-which will be affected by both drought and available acreage.
Photo by Scott Bauer , courtesy of USDA-ARS.

The view from the farm

The collective beef industry is a champion of increased efficiency. United States Department of Agriculture (USDA) records show that 10 years ago, 96.1 million head of beef cattle produced 26.2 billion pounds of beef for the world. In 2009, just six years later, it took only 94.5 million cattle to produce 26.4 billion pounds of beef. That is virtually the same amount of production with 2 percent fewer cattle.

Since 1977, there is 131 percent more beef with 70 percent of the animals using 19 percent less feed (Capper, 2010). This would equate to less water use, fewer greenhouse gas emissions, less waste products, and a lower carbon footprint for the same amount of food production. This has been accomplished with technology that includes genetic selection programs, pharmaceutical improvements, and biological enhancements for growth and feed use.

Certified Angus Beef, a premium beef product characterized by a higher quality
grade, had record high sales for six consecutive quarters that encompassed the
peak of the recent U.S. economic recession.

Certified Angus Beef, a premium beef product characterized by a higher quality grade, had record high sales for six consecutive quarters that encompassed the peak of the recent U.S. economic recession.
Photo by Dukemeiser/Wikimedia Commons.

Additionally, the data show there are fewer acres producing cattle. A 2009 report indicated there were 2 million fewer acres in farms since 2000 in Texas (Texas AgriLife Communications, 2009). North Carolina lost 1,000 farms in 2006 (Richardson, 2007), and Ohio lost 618,000 acres from 2002 to 2006 (Lane, 2009). One just has to look around the neighborhood in any rural community and see the loss of productive farms. With 85 to 90 percent of beef cattle in all enterprises on any given day using pasture and forages as the feed source, fewer acres is a significant dilemma.

The collective beef industry is a champion of increased efficiency. Since 1977, there is
131 percent more beef with 70 percent of the animals using 19 percent less feed.

The collective beef industry is a champion of increased efficiency. Since 1977, there is 131 percent more beef with 70 percent of the animals using 19 percent less feed.
Photo courtesy of Schick/sxc.hu.

A substantial issue for the future of beef production is a historical reduction in the size of the beef herd in the U.S. Records from the USDA indicate that the 2012 calf crop was smaller than the year before for the 17th consecutive year. With two-thirds of the U.S. in some stage of drought conditions, and most of the severe drought in major cattle-producing areas, the sell-off of cows and the reduction in production is continuing.

While this lower supply will fit the classical economic curve that results in increased price, the result is not positive for the future. First, fewer calves being born means fewer heifers available to replenish the herd. Heifers that are fed for retail beef further deplete the next generation of cows. Secondly, the position of beef as protein food could change.

According to the Consumer Beef Index, the reasons
consumers eat more beef include taste, eating
satisfaction and meal complementarity.

According to the Consumer Beef Index, the reasons consumers eat more beef include taste, eating satisfaction and meal complementarity.
Photo by orchid/morguefile.com.

With cow numbers at historic lows and a generation interval of over three years to reverse the trend, total beef production will continue to decline while pork and chicken production increase. The result is that pork could supplant beef for second place in animal protein food consumption simply because there are fewer steers out there. This is already affecting the industry, as a major Cargill beef packing plant recently closed it doors in Plainview, Texas.

An important feature of beef sales and support for price is exports. USDA records indicate that exports of U.S. beef have consistently increased from a low of 1.9 percent in 2004 (a low caused by bovine spongiform encephalopathy fears) to a high of 10.6 percent in 2011. These increases were valued at more than $4 billion. In 2011, exports accounted for about 11 percent of the total value of U.S. beef production - a huge influence on beef prices for farmers and ranchers. The major clients for American beef are Japan and Korea.

The problem with exports is politics. An example was the BSE scare in 2004-2005, when U.S. exports to Asian countries were reduced to nearly zero because one BSE infection was found in the U.S. There is little that can be done if a country decides to cut off imports as a way to punish the U.S. for some real or imagined issue.

Consumption trends

What is the market for beef? The prevailing wisdom is that baby boomers are the largest part of the population of consumers. Wrong - the largest percentage of consumers is termed "millennials." This sector is comprised of those people who are now 13 to 32 years of age, and they make up 29 percent of the population.

The beef industry still accounts for the
highest dollar sales of animal protein
foods, but its future is challenged in a
number of ways.

The beef industry still accounts for the highest dollar sales of animal protein foods, but its future is challenged in a number of ways.
Photo courtesy of elinluna/morguefile.com.

The Consumer Image Index (2012), reported by the National Cattlemen's Beef Association (NCBA), reflects some of the changing attitudes about beef among consumers. For example, this report showed that consumers were comfortable with science and new technologies to improve food safety and medical treatment for sick cattle at a rate 50 percent higher than for technology applied to cattle nutrition and decreasing fat content.

The Consumer Beef Index (2012), reported by NCBA, compared the reasons consumers would eat more or less beef in their diet. For those eating more beef, the reasons overwhelmingly featured taste, eating satisfaction and meal complementarity. For those eating less beef, the primary reason was cost, but this was followed closely by more healthy eating habits. Fully a third of these respondents cited their concerns about "factory farming" as a reason for eating less beef.

A 2010 study by Demeter Communications indicated that consumers feel very positive about farmers and family farms. They are significantly less positive about the term "ag industry." With 97 percent of all beef cattle coming from enterprises classified as "family farms" (USDA, 2009), this should be a positive influence on consumers.

There is presently still a market available
for high-quality beef that produces
a high-quality eating experience.

There is presently still a market available for high-quality beef that produces a high-quality eating experience.
Photo by Mahaba/Wikimedia Commons.

Price has an influence on specialty markets. After an increase in sales of beef products labeled as "natural," sales of natural beef declined by about 5 percent during the year ending March 29, 2009 (NCBA, 2009). Price does not have the same effect on the influence of taste and satisfaction. Certified Angus Beef, a premium beef product characterized by a higher quality grade, had record high sales for six consecutive quarters that encompassed the peak of the recent U.S. economic recession (Stika, 2012).

A substantial issue for the future of beef production is a historical reduction in the size of the beef herd in the U.S.

A substantial issue for the future of beef production is a historical reduction in the size of the beef herd in the U.S.
Photo courtesy of earl53/morguefile.com.

Consumers eat beef because they like it. Taste and eating satisfaction are important factors driving beef consumption. However, price, food safety, production methods and the industrial image of beef production are significant considerations for current and emerging consumers.

The future

When considering the near and long-term future of beef in regard to production, supply and consumption, the picture is not clear. It will take at least four years to change the trend in cow numbers in the breeding herd, but that result is contingent upon the availability of grazing - which will be affected by both drought and available acreage.

No one has answered the question of whether the significant number of farmers and ranchers who have stopped production because of drought conditions and high feed prices will re-enter the business. If they do not, what incentive will there be for new producers to enter the business? The reduction in steers to put on feed and the amount of beef available to consumers have and will continue to change the dynamics of the industry. This will include breeding programs at the ranch, the availability of beef processing units, and how beef will be marketed to consumers.

Loss of farm acreage is just one factor
affecting the beef industry.

Loss of farm acreage is just one factor affecting the beef industry.
Photo by JANYLEE/morguefile.com.
If beef loses its place as the king of eating satisfaction because people become more accustomed to eating pork, or because millennial consumers reject the image of beef production practices, what changes are in store for breeding and feeding programs?

There are a few things that are clear. First, there is presently still a market available for high-quality beef that produces a high-quality eating experience. The production phase must find ways to capture quality in breeding and management practices. Most of these practices are well-documented, and they must be more vigorously adopted.

Secondly, producers must realize the value of the farmer to a consumer. For too long, the beef industry has tried to market beef with the "I like beef" image and the nutritional advantages it holds. That will not be enough if we regard the reasons why consumers choose to eat less beef. The collective industry must now highlight how beef is made safe, which is a great story to tell compared to fish, eggs and fruits, according to reports from the Centers for Disease Control and Prevention (2013).

Farmers should become an important part of marketing. Certification programs such as Beef Quality Assurance and others will become essential. Absolute intolerance for poor handling and animal abuse is and will continue to be necessary. It will also be crucial to make sure the media is aware of positive animal production instead of just the negative aspects, as well as create cooperative teams with wildlife, environmental, recreational and community groups to become a part of the solution to an image problem.

The beef industry still accounts for the highest dollar sales of animal protein foods, but its future is challenged in a number of ways. Change is necessary to compete for most businesses, and beef is no different.

Dr. John Comerford is an associate professor and extension beef specialist at Pennsylvania State University.