It's wrong to yell “FIRE” in a crowded theatre when there is none. Conversely, it's irresponsible to say nothing when you perceive a threat.
Fortunately, the beef industry isn't facing a life-or-death issue as literal as a fire. But there is something smoldering in our basement. It's a “pounds first” heap of indifference to quality.
Within this heap there are leftovers from 30 years ago when we took consumer demand for granted and pushed whatever we could best produce. There are leftovers from when we broadened the grading standards for Choice and fought a “War on Fat,” with marbling as an unintended casualty. We were cost-cutters at all costs, in hopes beef could win market share back from pork and poultry, as if it were all simply generic protein.
Did it work? One economist said it put the beef industry into a “death spiral,” but some of the embers are still glowing down in the basement.
Turning the corner
Fifteen years ago, we began to get it right. The industry's long-range plan called for a consumer-focused and producer-driven industry. The idea lit a fire under consumer demand. The good kind, that comes with the aroma and sizzle of a high-quality steak.
We got it right when the beef checkoff promoted this image and the good news about “Beef. It's what's for dinner!” Never meant as “take it or leave it,” checkoff-funded research correlated quality to consumer satisfaction.
We corrected course when the National Beef Quality Audit (NBQA) showed how far we still had to go. The Brand-Like Initiative called us to realize beef must be more than a commodity. It had to aspire to greatness. Continuing research showed the importance of taste, not just tenderness, but flavor and juiciness as well.
Admittedly, my ties to the Certified Angus Beef® (CAB) brand suggest bias, but it looks like today's economics stoke the embers under that heap of indifference. Every segment must evaluate short-term profitability against the long-term sustainability of beef demand.
I'm not so bold to suggest that pounds don't matter — we even track our program's growth by pounds — but a pound of gold is worth more than a pound of lead. The producers I talk to most have developed an economic bias in favor of producing high quality. A 2007 Cattle-Fax study says production of premium Choice and Prime beef adds $500 million/year to our pool of money. A steer accepted for the CAB brand often brings $160 more than its Select grade pen mate.
Can we saturate that market? Not likely — the Cattle-Fax model shows dollar returns increasing as we increase the supply of premium beef. Where do these added dollars come from? From consumers. And we succeed by pleasing them.
If you still think this is a protein-cost contest, check out the retail trends. Beef increased in cost relative to pork and poultry during the recent decade of recovering beef demand. Relatively higher retail beef prices are here to stay, which applies greater pressure on perceived value. If we fail to provide a higher quality product than competing meats, it's a no-brainer for disappointed consumers to switch to a much cheaper protein.
Research and technology have done much in the service of our Long Range Plan, but not all discoveries feed the fire of consumer demand. Some of them encourage that smoldering heap. Some of them can only say, “Least-cost pounds of technically acceptable beef: It's what's for dinner!”
Beta-2 agonists are the latest example. Some commodity cattle feeders say they're a hot technology for producing beef more economically. Others have warned what these wonders can do over time, however. The initial rush (“We can use this to cheapen our cost of gain!”) can become resignation (“We have to use this to cheapen our cost of gain.”)
And when you step back and take a broader look, the impact they could have on a 15-year effort to build demand is alarming.
Is this progress?
Is this progress or a shortsighted solution with a long-term price? I know that no one sets out on the road with the intention of getting lost. We all want to sustain long-term beef demand, but short-term profitability is a powerful motivator in a segmented industry. How far down this road will we go before we feel the demand ramifications from such technologies? When we do, will it be too far or too late to turn back?
Americans trust technology more than most societies, but we have limits. How many pounds of “Premium Cloned Beef” could we sell? It's a crazy idea, of course, but it follows the same logic as other “push-through” strategies that apply the wrong meaning to our promotional slogan of “It's what's for dinner.”
If more producers adopt a brand-like attitude and aim for the premium beef targets, we'll generate more “pull-through” demand. We'll always have commodity beef that falls short, but we should never accept it as a target.
Market signals can be confusing, because psychology can turn green lights as yellow as $5 corn. But higher corn prices only make premium beef worth more, especially in comparison to the lower-value cattle unable to cross the Choice/Select line, or build U.S. beef exports.
The world demand for U.S. beef is specific: Choice and higher. That's what importers say they want from us. Conversely, domestic buyers say if they want Select-grade beef, they can import it for less than our price.
Feeding the wrong fire?
Are we headed down the wrong road, feeding the wrong fires? We can't afford to give people another reason not to buy beef. That's what happens if we produce more, lower-quality product. Even if the technology is new, the ideas come from that smoldering heap of indifference.
While the pork and poultry industries work to put marbling and taste back into their products, we seem all too open to options that could simply make beef taste like the breading you put on it.
No army gives up the high ground. Nor should the beef industry concede its No. 1 advantage — taste — to competing proteins and imported beef products. I've spoken with enough of you that I know I am not the only one who smells the smoke.
Will we as an industry fan the embers in the basement or douse them? Let's aspire to greatness. Let's profitably produce more pounds of the beef consumers want. That will feed the right fire and bury that other heap.
John Stika is president of Certified Angus Beef® LLC.