From the Jan/Feb 2018 CONCEPTIONS Beef News
The latest reports show that Beef consumption has steadily risen: 55 pounds per person in 2015, 56 pounds per person in 2016, 58 pounds estimated for 2017. 2% increase per person, times population growth, means several million pounds more beef are moving through American food stores these days.
So why have beef prices been down instead of up the last couple years?
Because the food retailing industry, in spite of all the “buy local” hype and farmers’ market venues as well as a rise in custom-processed specialty beef (such as “grassfed” or “Pied Lean”), continues to be consolidated. When internet companies like Amazon use their inflated stock (300 times earnings!!) to buy boutique chains like Whole Foods it is clear that prices at the farm gate must accommodate all the hands that food passes through before it reaches the majority of American tables.
Lower beef prices have in fact stimulated demand
For years, the national cow herd declined (from over 50 million in the 1970s to under 35 million after the new century arrived) without beef prices dramatically increasing. The reasons: (a) dairy source beef was filling the lower price sectors, for example fast-food hamburger; (b) more corn-fed animals meant heavier finish weights on carcasses; (c) lots of countries put a lot of effort into exporting beef to the USA.
Grass-fed beef is easier for chain food companies to source overseas
Make no mistake—“grassfed beef” is here to stay as well as growing. The cost to price ratio for corn is not sufficient for rangeland to be converted to row crops, so grazing remains a higher per-acre profit use for cattle feeding. Thus desire to keep acreage “in grass” leads to desire to feed animals “on grass” for a longer period than just birth to weaning and for dry cow maintenance.
However, there is little movement to create a “grass fed beef” marketing infrastructure to move cattle from dispersed grazing farms to central collection locations to serve chain food marketing. Thus, most of the “big guns” in beef retailing contract “grassfed” beef from as far away as Australia.
For the near future, those with a willingness to do direct-marketing (as freezer beef or USDA inspected boxed meat packages) will earn a market premium and help grow beef consumption among a primarily urban upscale food activist clientele…But if you try to buy it at Wal-Mart, you will understand why the “COOL” initiative got shot down. Their “grassfed” beef comes mostly from South America.
Even at current prices, farm beef production currently has the best profit margin of any major agricultural commodity being produced. Meanwhile, the lower per pound prices we are receiving can be managed with lower grain costs, multiple options for age at sale, and improved sale weights (some genetic stimulus here).
The trend toward higher beef consumption, while small “per person”, is still a steady trend and has room to grow; after all, 58 pounds per year is still only 1.1 pounds per week, which is two “quarter pounders” and an 8 ounce steak (or pots of chili with meat sauce) on the weekend. Every gas station convenience store now offers entire racks of meat snacks and beef jerky.
Beef prices may be down from a couple years ago, but the premium for “beef breed” calves and feeders (over dairy breed deacons and feeders) is larger and (based on comparative genetic selection trends) will remain so.
Those of us who see AI sires “on the hoof” at various AI centers will confirm that the Beef breed sires are “meatier” than was true 20 years ago, while Dairy breed sires are trapped in an “angularity” selection trend that works against fleshing feed efficiency.
The future growth in the Beef industry output will no longer come from dairy steers—it is coming from a resurgence in Beef breed feeding efficiency and specialty breed marketability. “Grass fed” beef just requires “beef breed” genetics, while dairy beef is increasingly dependent on corn and soybean to reach finished quality. (The only numerous dairy breed with any marbling ability is the traditional Jersey.)
Looking for sires to keep you aligned with the trends? Just ask us.
Mich Livestock Service, Inc ph (989) 834-2661 PO Box 661 Ovid, MI 48866