My View From The Country

Time Is Running Out On Beef Demand

The U.S. beef industry still has time to stop the decline in demand, but the time to act is now.

I love the beef checkoff. Perhaps more accurately, I believe in the importance of building beef demand, and I think the programs that have been carried out by the contractors with our checkoff dollars have been tremendous.

Most people understand the good work the checkoff has done and is doing. Certainly, it has had its share of problems, but that’s to be expected with any government program; politics will creep in. But the overwhelming support for the checkoff program as expressed by regular producer surveys attests to the fact that producers understand the importance of building demand.

In fact, I contend there’s nothing more important to this industry than building demand, as it will ultimately determine how big of an industry we have. Yet the experts, even those of commodity groups, acknowledge a few truths:

  • First and foremost, the checkoff is underfunded. Not only is the actual dollar amount declining with shrinking cattle numbers and transactions, but inflation has reduced the buying power of every dollar to half of what it was when the checkoff was created.
     
  • Secondly, when the checkoff was created, a lot of issues affecting current demand weren’t even on our radar screen. The checkoff does a great job, but it’s restricted from doing a lot of things that are necessary to build beef demand. As a result, while the checkoff has been successful given its limitations, it has not been nearly as successful as other checkoff programs.

A look at other industries

The dairy industry is a great example. It was faced with per-capita consumption declining at a rate rivaling the decline in the beef industry. But the dairy industry not only reversed the trend but – like the poultry industry – is now seeing per-capita consumption increase every year almost like clockwork.

The dairy industry contributes nearly 10% of the total dollars amassed by the beef checkoff, but the average dairy cow in production contributes $35 to the dairy checkoff! I will allow that a dairy cow can produce $5,000 of milk compared to a $1,600 fed animal, but even considering that difference in value, the beef industry should be paying almost $7/cow to be commensurate with the dairy industry’s checkoff collections.

The latest price estimates and production totals tell the story. Beef production remains historically tight and is expected to decline in 2014. Meanwhile, both pork and poultry production are expected to grow by 3% and 4.5%, respectively. Those two proteins continue to export more and more of their production, while USDA projects beef exports to remain stagnant.

The numbers continue to tell a depressing story relative to the beef industry’s efforts to grow market share and demand. Perhaps most alarming is that we’ve become so conditioned to losing market share to our competitors (other protein sources and global beef suppliers), that we tend to celebrate that the rate of decline is not as fast as it once was. 

Admittedly, the last decade had four events that fundamentally and negatively changed the size and scope of our industry.

  • It began with the BSE case in late December 2003 which shut down our export markets. We’re just now getting to the point where we can begin once again to try and build export demand.
  • The BSE case was followed by a drought cycle that helped accelerate industry consolidation.
  • There was the massive subsidization of ethanol, which changed the structure of our industry and precipitated a dramatic contraction of our industry.
  • Finally, there was the inter-industry squabbling that led to the industry taking its eye off the prize of building beef demand, improving product quality and production efficiency. Instead, we focused our limited resources on counterproductive agendas like mandatory country of origin labeling, a GIPSA overhaul, etc. In essence, we shifted our focus from the ultra-important tasks of building demand, and improving product quality, and production efficiency. We need to get back to focusing on our challenges and opportunities.

The pork industry’s latest checkoff-funded advertising indicates just how vulnerable the swine industry believes we are. Few people recognize pork cuts, but beef cut names have both high recognition levels and a high consumer association with quality. Pork, however, will now market ribeyes, porterhouses, and the like, with the message that their cuts are cheaper, better, and even healthier than beef. In essence, the pork industry is utilizing the same tactic as its other hugely successful campaign – “The other white meat.”

It’s no secret that beef’s competitive position with pork and poultry has been deteriorating on a price basis; pork’s campaign is a full-out assault to try and wrest market share. The problem is that the U.S. beef industry is strictly in a defensive position, and losing ground.

It’s time for the industry to mobilize

Our industry needs to finds ways to supplement the efforts of the beef checkoff and overcome the program’s inherent weaknesses. These include insufficient funding, narrowly prescribed methods to build demand, and a governing structure that has caused it to become a political football instead of allowing it to concentrate on its intended purpose.

We must tackle the beef demand issue with the same aggressive plan and posture of the U.S. commitment to put the first man on the moon. We’re in a war, folks, and we’re losing battle after battle. We still have the advantage of having the best-tasting product, the capability to convert low-quality forage into a high-quality protein, and consumers who largely enjoy our product. We still have time to stop the decline, but the time to act is now. 

It doesn’t appear that changing the current checkoff is a viable option. The focus is on keeping the current checkoff operating as it has been, while developing other funding and governance structures that will allow the industry to attack the demand equation with the effort that is being demanded. It’s imperative, however, that the industry move back into an offensive mode, rather than playing defense. 

 

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Discuss this Blog Entry 9

Margaret (not verified)
on Jun 21, 2013

I believe you make a good, if depressing, point. Here's my concern: it's one thing to say we need to raise demand and another entirely to actually do it. While attending the Florida Cattlemen's Convention, I spoke with members of different counties' beef advocacy groups that neighbor my own county. From these discussions, I brought away that, while the talk is good, few are actually DOING anything. Each time I spoke with someone hoping to get involved in interactions with the public, I was told "Well, our county's members haven't been all that active, recently." There are organizations with the stated purpose to "advocate for the beef industry" and "increase demand" for beef with membership rolls, monthly/quarterly meetings, and little to no contact with the very people we/they desire to influence. Other than being able to say "I belong to:____", what's the point?

I work a fulltime job, have 3 elementary/middle school aged kids, my husband is disabled, and I'm in college (and that list doesn't include church or school-related activities). I understand we live busy lives that constantly pull us in opposite directions; I really do. But if we do not make ACTION a priority, our way of life, our heritage, the legacy passed to our children will become removed from reality and just another "family story" we tell our grandkids at bedtime.

Allison Florance (not verified)
on Jun 21, 2013

We are all challenged with being increasingly efficient with our businesses, no matter how mature they are. There is never enough money for all of the good ideas and in the cattle industry all kinds of things remain unfunded because there is a higher priority. We can look to our government as an example of a small group of folks "representing" us by continually spending more of OUR money than they have exacted from us. We expect that once we get a good group like our checkoff program, they will have figured out how to do more with less. The concept that we should be hitting a certain $ amount to the group because someone else is spending it is the rational of comparison, not effectiveness. It is a slippery slope which always leads downhill.

Brian (not verified)
on Jun 21, 2013

The end user has been priced out of the beef market. Consumers are strapped, anyone who can't see that doesn't have a lick of sense. Pork and chicken taste good too, and they are cheaper. When a working mother looks through the "protein options", much of the time from a standpoint of economic necessity she has to pick pork or chicken.
A child's tummy gets just as full from a pork chop or drumstick as it does from a hamburger or steak.
As children grow up eating very little beef, most of them will go through adulthood eating what they did as children. This "demand erosion" may get much worse.

on Jun 21, 2013

For those interested in a research-based look at consumer beef demand, the Beef Checkoff funded study called Beef Demand: Determinants and Future Drivers is available on the Beef Board Web site: http://www.beefboard.org/evaluation/130612demanddeterminantstudy.asp
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GARY (not verified)
on Jun 21, 2013

We as producers are going to have to find ways to help build demand with consumers. Its just like everything else in life...if we sit and wait for others to do it, it most likely won't fully get done. I have no problem with the checkoff, but throwing more money at it doesn't automatically make it more effective. Our industry groups and even breed associations need to spend less time attacking each other and more time promoting the beef industry. If we continue to lose market share, it won't matter much which industry group has the most clout or which breed has the most registrations. Take any and all opportunities to help ourselves and everybody needs to pull in the same direction. Beef has the taste that NO other protein source will ever have no matter how much seasoning you put on it! I for one will not give up the fight.

John R. Dykers, Jr (not verified)
on Jun 21, 2013

More and more beef will be sold by Brand and the brand will advertise and promote.
Focus on tenderness, (rapid growth and early harvest) and broil for quick meals, steak or ground. Stew a great secondary cut. Roasts are almost obsolete. Bone out at the packing plant. (The T bone exists because of the power saw!)
JRD

John R. Dykers, Jr (not verified)
on Jul 1, 2013

And promote the STEAK is special !
JRD

Anonymous (not verified)
on Jun 21, 2013

The challenge with the beef industry is unlike the vertical integration that occurs in the pork industry and to a lesser extent the dairy industry, we are continually looking for the next best thing and we are forced to do it from 12 different directions. Until the beef industry creates a real standard for quality it will continually be an uphill climb lined with pork chops and rivers flowing with milk.

Anonymous (not verified)
on Jun 26, 2013

Anyone interested in the shrinking numbers should look at the consumption of beef per person when the checkoff began compared with what it is now.
I do not believe the checkoff has contributed to increased beef demand. While some of the education programs have been effective how many consumers, including myself as a producer, are unhappy with buying a roast or steak that is good one week and poor the next.
Brian makes a good point and unless we can come up with more consistency people will turn to other protein sources.
Gary also makes a good argument.
WP

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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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