In order to remain economically viable, a minority in each industry segment has grown larger over time and accounted for more production.

Only 9% of beef cattle operations have cowherds of 100 head or more and control 51% of the nation’s herd. Conversely, 80% of beef cow operations have herds of 50 or fewer cows, accounting for 27.7% of the national herd.

Meanwhile, a handful of cattle feeding organizations churn out the lion’s share of the nation’s fed cattle. Four beef packing companies account for 80% of annual fed-cattle slaughter. And, in 2009, the 20 largest food retailers accounted for 64.2% of all U.S. grocery store sales, up from 39.2% in 1992.

Saddled to a different pony, by and large, the beef industry remains a commodity business driven by pounds, narrow margins and the necessity to lower costs.

Arguably, more vertical cooperation exists between various industry sectors than at any time in history, but the linkages remain few and tenuous.

New market targets and valuations have turned up. Alternative marketing arrangements have emerged that enable folks in each sector to reduce cost and manage risk. Some feedlots and packers have worked together to market branded-beef products. Others have tried to identify and share value with cow-calf producers, regardless if they retained ownership in the cattle.

Staggering sums of money have been lost by a few entities trying to create closed-loop, fully integrated systems. A few hardy souls, such as U.S. Premium Beef, developed successful models to value beef closer to the consumer and price the cattle to producers accordingly.

Mostly, though, the trade remains based on immediate need and long-term relationships. Sheer scope and equity requirements are part of it.

The national beef cowherd of 29.3 million head is dispersed among 729,000 or so different operations. There are currently about 2,140 feedlots with 1,000 head or more capacity. In 2009, there were 210,000 traditional food stores in the U.S., according to USDA’s Economic Research Service. There are 980,000 restaurant and food service outlets, according to the National Restaurant Association.

Industry fragmentation is part of it. There are cow-calf producers, stocker operators, feedlots, seedstock producers, packers, wholesalers, retailers and food service. Few participants retain ownership in the cattle or beef product beyond a single sector.

All of this occurs ahead of more than 300 million potential domestic consumers getting a crack at buying the finished product.

International demand is the key

Going forward, a couple of things seem certain.

  • First, given the declining quantity of beef demanded by domestic consumers, logic suggests any opportunity to grow the U.S. beef business significantly rests on the shoulders of international consumers. By March of this year, U.S. beef exports were accounting for 9% of U.S. muscle-cut production and $222.20/head of fed-cattle slaughter.
     
  • Second, maintaining domestic demand means coming to grips with an evolving population and a new generation of market-makers. The millennial generation (born 1980-2000) numbers 80 million; they’re a larger group than the baby boomers. According to various research, millennials like beef, but few of them know much about cooking it.

Overall, the average U.S. household is getting smaller. Traditional families (a married couple with children) accounted for 30% of all U.S. households in 1980. This figure was 24% in 2000, and it’s expected to be just 17% by 2020.

The U.S. population is growing older and more ethnically diverse, too. By 2056, for the first time in history, the U.S. Census Bureau expects the population ages 65 or older to outnumber those ages 18 or younger.

In addition, the U.S. is projected to become a majority-minority nation for the first time in 2043. Minorities represent 37% of the U.S. population currently; they’re projected to make up 57% of the population in 2060.

Those are all trends that a changing U.S. beef industry must adapt and react to.
 

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