Lean finely textured beef (LFTB) is too valuable to the U.S. consumer to be lost to the industry and will recover its position in the human food chain gradually over the next 2-3 years. That’s the estimation of researchers at Rabobank’s Food & Agribusiness Research and Advisory (FAR) group, a global team of more than 80 analysts who monitor and evaluate global market events that affect agriculture worldwide.

In a report released Wednesday, the FAR group says changes will need to be made to the LFTB production process and more transparency and consumer education will be required to make the re-entry a reality.

“With the help of increased transparency from industry and the USDA, over time, consumers are likely to be accepting of a return of the product, albeit with greater labeling transparency, as the reality of the truth about LFTB becomes better understood and they have the opportunity to see the benefits of the return of LFTB as a safe, cheap source of beef protein to the retail market,” the researchers say in their report entitled “LFTB: Beef’s Latest Battleground for Survival.”

But, adds report author Don Close, vice president of food and agribusiness research & advisory, animal protein, it will require the beef industry “to make a more sustained effort to educate consumers on the product, to dispel the myths and concerns that have grown through the LFTB crisis and to regain the trust of consumers, regulators and retailers, so that the beef industry can ensure the market has confidence in the safety and nutrition of LFTB.”

The report makes these six summary points:

  • The LFTB crisis is a wakeup call for the U.S. beef industry. The battle for beef is on and the industry needs to respond positively, learn their lessons, and develop a long-term plan to meet ever more demanding customer and consumer needs and expectations.
  • The costs of the LFTB crisis are real and will impact all participants in the U.S. beef industry, from LFTB manufacturers, packers and feeders to retailers and consumers.
  • LFTB is too valuable to the U.S. consumer to be lost to the industry and will recover is position in the human food chain gradually over the next 2-3 years.
  • Changes will need to be made to the LFTB production process and more transparency and consumer education will be required.
  • Consumers are more susceptible than ever to scares about the food they eat.
  • The U.S. beef industry must be better prepared to respond to similar situations with transparent and proactive consumer, government and customer education.
  • In a section headlined, “There Are No Winners,” researchers says the industry was “caught severely off-guard” and “paid a heavy price for this unpreparedness.” But Rabobank estimates that, as a result of the LFTB crisis, total U.S. beef supplies have declined by an additional 2% at a time when beef supply is already at historically tight levels and likely to tighten even further in 2012/13.

“Retail consumers will undoubtedly face higher prices and ironically lose access to what is a very safe (treated) meat product which had a lower risk of E. coli and Salmonella than conventional ground beef.”

Meanwhile, the report says packers and processors have lost efficiency through reduced total carcass yields, while cattle feeders moved from breakeven-to-modest profits before the LFTB incident, to moderate and severe losses after. Cattle producers will also feel the impact, researchers say.

“While the availability of replacement cattle may force cattle feeders to pay up for replacement cattle in the short term, the reduced efficiency through the entire production process will ultimately be passed on to cow-calf and stocker operators,” the report says. Thus, the removal of LFTB from the market has hit all sectors directly through lower carcass returns, while impacting consumers through higher retail prices.

While it’s too early to determine a final outcome for LFTB, researchers say that, as time moves on, there will be an opportunity for the channel and consumers to better evaluate the relative merits of LFTB as a cost-efficient source of safe, lean beef protein. The report notes the re-entry of LFTB into the U.S. beef supply is contingent on needed changes in the formulation of the product, as well as assurance from the USDA as to the safety and nutrition of the product.

“Over time, consumers are likely to accept a return of the product – albeit with greater labeling transparency – as facts about LFTB becomes better understood and consumers have the opportunity to see the benefits of LFTB as a safe, cheap source of beef protein,” Close says.