“Despite the fact that the U.S. has become a ground beef nation, the beef production model has changed very little over the years,” Close says. “Little consideration has been given to which cuts the beef consumer is selecting, and why.”

To be fair, after losing consumer demand at the rate of about 1% annually from about 1977 to 1997, the beef industry expended amazing resources in creating a more dependable eating experience for consumers of middle meats. The beef complex even figured out how to fabricate the carcass differently to provide lower-cost middle meats.

The problem is, much as cattle production is the byproduct of land ownership, ground beef production is often regarded as a byproduct of middle-meat production. The industry’s focus has been almost exclusively upon the highest-value but lowest-volume portions of the carcass. Virtually all cattle fed in the U.S. are managed with that goal in mind.

This challenge is compounded by the fact that traditional sources of beef used in ground beef production — cull cattle and imports — are drying up. Thus, a larger portion of the fed-cattle supply — created with the highest-cost inputs — is being diverted to ground beef production, making beef even less cost- and price-competitive with other animal proteins. Helming estimates the equivalent of 42% of all fed cattle went into ground beef production last year.

Close points out that increasing ground beef demand is altering traditional price relationships.

“Historically, all steak prices traded in a range of 2.3-2.7 times [those of] ground beef,” Close explains. “In 2004, the price relationship between steaks and ground beef began to narrow. By 2013, the price for all steaks was just under 1.7 times the price of all ground beef … entirely driven by strengthening ground beef prices.”

So, the problem isn’t that ground beef demand is growing, but that so much beef in the grinding tub is from fed cattle.

Rather than add value to lower-value beef by churning out ground beef that consumers are willing to pay increasingly more for, the opposite occurs: Value is subtracted. That makes beef even less cost-competitive, Close says.

 

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