Rabobank: Beef industry out of touch with consumers
Feb. 5, 2014
by Keith Nunes
NEW YORK — American consumers have an affinity for hamburgers and tacos, products made with ground beef. Yet, the US beef industry is structured around providing high quality products to white-table cloth restaurants. The contradiction underscores the opportunity the beef industry is missing by not catering to its core consumer, according to a new report from Rabobank.
“Under the existing business model, the US cattle industry manages all fed beef as if it were destined for the center of the plate at a white tablecloth restaurant,” said Don Close, cattle economist for Rabobank. “The industry is, essentially, producing an extraordinarily high-grade product for consumers who desire to purchase a commodity.
“More than 60 percent of US beef consumption is ground product. If the US cattle industry continues to produce ground beef in a structure better suited to high-end cuts, the result will be continued erosion of market share,” he added.
At the same time that the beef industry has been targeting the high-quality market, pork and poultry processors have positioned themselves as suppliers of convenient proteins that are competitively priced.
“The [beef] industry must change to a production model that determines the best end use of an animal as early as possible, in order to compete in a ‘ground beef nation,’” Close said. “A new system for end-use categorization that influences calf selection, cattle management, production costs, and feeding regimen throughout the life of the animal is vital to keeping beef competitive with other choices at the meat counter.”
The report recommends the establishment of a two-tier production system. Under such a system, the top one-half to two-thirds of the calf crop would be identified as early as possible in the raising process and managed as they are today, with the products from those cattle going to the white tablecloth marketplace. The second tier would include lower quality calves that would be fed a less expensive feeding regimen.
The report said, “As a result, the industry would not be pushing lower quality cattle into a grading percentage they cannot realistically or efficiently accomplish, nor would it be over-feeding the animal in hope of reaching the higher grading rate.
“A model such as this benefits retailers and end users as it produces a larger supply of the products that currently have the highest degree of demand and growth rate while at the same time does not radically disrupt the supply of products for those looking for conventional or higher-quality products,” the report added.