Nobody ever said the cattle business was going to be easy, but who knew even 20 years ago how complicated it would be to raise a calf and get it sent off to market. In fact, these days the word “market” means far more than a call from an order buyer or trip to the action barn.

And at every juncture, the beef industry is facing mounting and intense competition. Not long ago, the industry's only concerns seemed to be white meat and white-gloved environmentalists. Today, duking it out for market share with chicken seems like a snap.

Additionally, horizontal and vertical integration in food service and retail foods has everyone wondering where their food comes from. And don't be fooled into thinking there's no more room for mergers and acquisitions. Just watch.

The constant thought in the food chain, led by nearly every other consumer good, is globalization. Thinking back, the 1989 Canada/U.S Free Trade Agreement and the ensuing North American Free Trade Agreement were a cakewalk compared to the complexity of the new millennium trade picture.

In the shadow of the World Trade Organization, bi- and multi-lateral trade agreements have, interestingly, been the vehicles of “free trade.” And because the definition of free trade is so nebulous, and because ag often takes a back seat to other industries and issues in trade negotiations, we often feel like the fifth wheel.

No wonder many U.S. cattle producers feel abandoned by their government when it comes to trade issues.

Where the cattle are

The place to start assessing global competition in the beef industry is to look at where the cattle are raised (see Figure 1). India has the world's largest cattle herd by far. But cows are considered sacred by Hindu religion because of their milk.

Brazil, with the largest commercial cattle herd, is where cows are respected for the meat — and wealth — they provide. Estimated today at 180-190 million head, Brazil's cattle herd has grown by 5 million head/year the past decade. However, there are signs this growth is slowing due to competition for the better ag land in Brazil's southern regions.

Interestingly, China's cattle herd is third in size globally. Prior to 1980, only culled draft animals were harvested for beef. Today, in a country with millions of small farmers, families typically sell one or two calves each year to local abattoirs for slaughter. Thus, it's unlikely China will be a world player in beef trade.

And, there's a great deal of speculation — and not much agreement — as to China's future as an importer. The U.S. Meat Export Federation (USMEF) simply says the Greater China region, comprised of Hong Kong, Macau China and Mongolia, holds growth potential for U.S. beef and beef products.

The U.S., with the world's fourth-largest cattle herd, ranks first in beef production. Incredibly, the U.S. with nearly half as many cattle, produces more beef than Brazil.

Few other countries can boast the rate of production on a per-cow basis as the U.S. The combination of genetics, nutrition and animal health work well with our grazing and feeding infrastructure to make U.S. producers the envy of the beef world.

Consumption and imports

Not surprisingly, the U.S. is also the largest beef-consuming nation. Even with its production capacity, the U.S. — much to the consternation of many producers — is the world's largest beef importer. U.S. processing companies buy about 31% of all beef entering international trade.

But, what are the drivers of U.S. beef imports?

With the highest wholesale beef prices of any major trading country, the U.S. is a virtual economic sponge for global beef supplies (Figure 2). Last spring, when U.S. fed beef prices were hovering around $90/cwt., slaughter cattle in Uruguay fetched $42/cwt. Even given transportation costs, and in-quota and out of-quota import tariffs paid to the U.S. Treasury ($100 million in 2005), this price differential makes Uruguayan beef a great buy for U.S. importers.

Related to the economic driver is the insatiable U.S. appetite for ground beef. A recent national eating trends study shows ground beef makes up 59% of all fresh-beef eatings in the U.S., and shows no sign of slowing. Therefore, about half of all beef imports are lean (90% lean) beef trimmings used to blend with higher-fat domestic trimmings to produce typical 75%-85% lean ground beef for retail and food service (see “Making the case for trimmings,” p. 42, November 2006, BEEF).

The trend toward fewer dairy animals nationally (thus, fewer “lean” cull cows), a smaller domestic cow herd and high-fat trimmings from fed animals create a shortfall in domestic lean trimmings. Adding to the lean-trimmings shortfall is higher-value uses for chuck, plate, flank and other lean cuts that historically went to grinding.

U.S. vs. the world

U.S. beef production systems vary a great deal geographically as ranchers and farmers have adapted to varying environmental conditions. But overall, the U.S. has a highly differentiated beef-production system compared to most other beef-producing nations.

This difference can be summed up in one word — corn. The colossal feed-grain resources of the Corn Belt shape the large majority of domestic beef-production systems. From the genome on, producers put this unique advantage to work in creating beef products that virtually no one else in the world can enjoy — unless they trade for them.

Even in Canada, most grain-finishing systems center on barley. But, “barley-fed” beef just doesn't have the same ring to it, inside and outside the feedlot sector, as “corn-fed” beef.

Other cattle countries, mainly those in South America, Australia and New Zealand (Oceania), are relegated to growing and finishing beef cattle primarily on forages. They simply don't have the vast climatic resources and infrastructure to support a massive corn industry. Nor do they have the economic foundations that make raising corn for feed as feasible or practical.

It makes sense in developing countries, as well as developed countries where corn resources are lacking, that food crops for human use are grown on the best land first. While people will get the corn first, any leftover grain goes most likely to the best “converters” next — poultry and pigs, in that order.

If there's still corn available, and its feed value exceeds its cash value, it can be used for “finishing” beef cattle. Few countries have the literal luxury of being able to turn corn protein into beef protein on a scale large enough to define an industry.