My View From The Country

Beef Quality vs. Economy Isn’t The Real Question

The challenge isn’t overcoming the antagonisms that exist, but improving at a faster rate than our competition.

I’m hearing the question of beef quality vs. economy come up quite a bit this summer. The question actually has two parts:

  • Is beef is becoming too expensive to retain its place at the center of the American plate?
     
  • And if it is, is it destined to become a high-end luxury food with a decreasing role in the American diet and a greater reliance on exports?

There are a lot of factors contributing to this debate, and every sector of the industry seems to be weighing in on the issue, with each having a little different take on the situation. But I think the question is a bit nonsensical in that it’s really a backwards way of talking about other serious issues. These include:

  • Can our industry remain competitive with the other protein sources?
     
  • Can we grow as an industry?
     
  • Can we increase profitability for participants?

The answers, of course, aren’t hard to determine; they’re just hard to implement.

There are three primary ways to increase revenue – increase the price you receive for your product, increase the amount of the product you sell, or decrease the production and marketing costs associated with your product. Virtually every business seems to focus on either increasing margins or increasing volume, while history tells us the two are often antagonistic.

Businesses have tended to focus on either being low-cost producers or purveyors of high-end products, but it doesn’t mean one can ignore the other. Walmart still cares about product quality, and Bloomingdale’s still focuses on being more efficient.

As a commodity business, the biggest focus has always been on lowering the cost of production. But the great irony is that beef can’t compete on a cost basis with pork or poultry. Nor can the U.S. beef industry compete on a cost basis with countries like Brazil and Australia. Thus, our niche is being the low-cost producer of a high-quality product. The trick is, and always has been, finding the balance.

It isn’t an either-or question for the cattle industry. Even on an individual carcass basis, we have huge variation in the valuation the marketplace assigns to various cuts. We have low-value hamburger and high-value middle meats. In fact, one of the industry’s great success stories in recent times has been the upgrading of cuts that used to be ground into hamburger.

In addition, there’s a misconception that exports amount to just sending high-end middle cuts to Asia. However, significant value is created in sending everything from tongues, livers and tripe to foreign markets at a significant premium to what they would bring in our domestic market.

But our industry’s contraction and the subsequent rise in prices do raise legitimate concerns about our ability to compete effectively. Still, after pondering all these legitimate points, I’ve come to believe that the conversation is misguided. Improved genetics and management practices don’t make this an either-or debate.

As seedstock producers, we’re all guilty of promoting our emphasis. If we focus on the maternal side, we downplay the terminal side. If we focus on muscle, we downplay quality. If we focus on growth and efficiency, we downplay the value of calving ease and fertility.

We tend to do the same thing commercially. If we focus on low input, we tend to accept lower weights. If we focus on smaller mature size, we’re willing to sacrifice growth, etc.

That same scenario plays out in every single cattle production sector. The reality is that the 400-lb. weaning weight calf that will finish at 1,150 lbs., with an average quality YG 3 carcass is an absolute drain on our industry. So is the 900-lb. weaning weight calf that will finish at 1,500 lbs., with a low quality YG 1 carcass.

The “optimum” cow that produces a less-than-optimal calf for the other segments in the chain isn’t optimum. The “optimum” carcass that will not work for the cow-calf industry is a long way from optimum as well. There are always tradeoffs, and everyone’s optimum will be different depending on their target market, resources, management and marketing programs, but the bar is ever rising.

Don’t get me wrong, the industry continues to focus on the right things. We’re making better cattle – cattle that work better in every segment of the industry. Sires popular 10 years ago would be below-average bulls compared to a lot of commercial producers’ bull batteries today.

With that said, I think we’re using this debate between quality and efficiency as an excuse to say we don’t need to continue to change and make improvement. The bar is always rising.

A decade ago, our operation laid out a set of goals I didn’t know if we would ever achieve. We were going to run our cows with less input than our competitors. And we were going to focus on building a cowherd adapted to our environment in eastern Colorado, while producing cattle for our customers that were not only profitable, but would help build beef demand and grow our industry.

Our primary focus had to be on calving ease, maternal, environment adaptability and convenience traits. But we also set the goal of producing 5x5, 80x80 and 0 cattle. That stood for cattle that gained 5 lbs./day and converted at 5:1; were 80% average Choice or higher, and 80% Yield Grade 2 or lower; with 0 outliers.

At the time, we thought we might never reach those goals. While we don’t have many customers whose cattle are routinely gaining over 5 lbs./day, we certainly see pens of cattle that do. Meanwhile, conversions are improving dramatically and, with the help of beta-agonists,we’re seeing conversions zero in on the mark. We’ve increased growth significantly, while seeing mature size decrease.

While the 80x80 cattle goal perhaps wasn’t 100% accurate, market signals are continuing to encourage producers to feed cattle to a point where they have no more than 20% YG 3s, and we’re eliminating 4s, with significantly larger rib eye area and hot carcass weight. And our environment and emphasis on maternal traits hasn’t allowed us to put the kind of selection pressure on post-weaning traits as others have! 

 

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There is no debate between calving ease and rapid early growth, mature size and growth, muscle and marbling, etc. The answer is moving forward simultaneously on all the economically relevant traits of beef production. It’s true that there’s no right animal for every environment, or one right animal for every market, and there are thousands of combinations of genetics, resources and target markets that equate to that many or more optimums at any given time. Yet the tools are getting better to analyze and improve.

The exciting thing is that we do know that what is optimum won’t be optimum in five years. The only debate is whether we can make these strides at a faster rate than our competitors, and that should be the focus.

There will never be a one-size-fits-all solution. We will have people eating at Morton’s, Applebee’s, and McDonald’s every single day, and we’ll be raising cattle in Nevada, Iowa and Florida. About the only thing that will be constant is that the cattle will be much better. The challenge isn’t overcoming the antagonisms that exist, but improving at a faster rate than our competition.

 

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Discuss this Blog Entry 3

avatar (not verified)
on Aug 30, 2013

The beef industry has always been one of segments. Except for the few who maintain ownership all the way through grid marketing it still is. Each segment tries to optimize its production and cost in order to maximize profit. Ain't gonna change.

John R. Dykers, Jr (not verified)
on Aug 30, 2013

Decreasing production and marketing costs do not increase revenue.
Cattle can compete with chickens and pigs in cost of edible protein produced if fed what ruminants can digest that the others cannot.
Otherwise, well said.

on Feb 4, 2014

I’ve observed of a few individuals who have a popularity for putting livestock in various locations on a rangeland, making them, and the livestock will remain in the same area until the herder profits to shift them to clean nourish. Accountant London

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What's My View From The Country?

As a fulltime rancher, opinion contributor Troy Marshall brings a unique perspective on how consumer and political trends affect livestock production.

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Troy Marshall

Troy Marshall is a multi-generational rancher who grew up in Wheatland, WY, and obtained an Equine Science/Animal Science degree from Colorado State University where he competed on both the livestock...

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