When you're getting more than $500 for a five-weight calf, it can be hard to imagine you're not doing something exactly right. With drought stalling herd expansion, simple supply and demand economics say calf prices are in no danger of softening up much for more than another year.

Larger issues suggest a bleaker picture though. Beef demand has dipped for six consecutive quarters, as measured by the Retail Beef Demand Index (BDI). Thankfully, beef demand is still 25% stronger than when the industry halted two decades of declining demand in 1999.

There have been plenty of challenges the past 18 months, including mammoth total-meat supplies, chicken at give-away prices because of international consumer fears about avian influenza, not to mention record energy prices sapping consumer optimism.

But last year's annual BDI was on par with demand in 1992. That was before the historic supply crunch created by growing demand, drought, then BSE — the latter of which catapulted the market forward as the U.S. tried to fill the export void left by Canada until the disease was also discovered here. It's tough to bank on such an extraordinary alignment of the economic stars anytime soon, if ever again, in our lifetimes.

Quality grades continue decline

At the same time, depending on how you look at the recently released 2005 National Beef Quality Audit (NBQA), the industry isn't gaining much ground in providing consumers with the predictable, goof-proof, eating experiences they crave.

Certainly producers have made strides in key areas since the 2000 NBQA, such as improving microbiological safety, improving cattle genetics and reducing the incidence of injection-site lesions.

Strides have been made since the first NBQA was conducted in 1991, too. In fact, according to the latest report, the industry has recaptured 21% of the $70.20/head in lost opportunity cost in 1991. Arguably, those gains haven't come at the hands of carcass quality as measured by U.S. Quality Grades.

Despite the fact there are more quality-based branded programs and buying grids that at anytime in history, with the highest Choice-Select spreads in the past five years (which of course are directly correlated to how much Choice and better beef is available), fewer cattle grade Choice or better today than in 1975 (84% Choice and Prime in 1975; 58.5% in 2004). Quality Grade represents the single largest lost opportunity in each NBQA ($26.81 in 2005).

Insufficient marbling is the single greatest quality challenge in the eyes of purveyors, retailers, restaurateurs and packers. It was also the leading quality challenge when aggregating the responses of seedstock operators, cow-calf producers, stockers/backgrounders and feedlot operators.

This at a time when seedstock producers have more selection tools for carcass quality, and have applied more pressure than at anytime since Continental breeds became part of the national melting pot.

Keep in mind there's no way to accurately compare quality grades between audits or years because USDA figures only account for carcasses officially quality graded. That number varies, which can make raw percentages deceiving, as analysts say is the case when trying to compare 1975 to 2004.

Even if the rate was constant though, why isn't Quality Grade increasing when so much attention is focused on it? Speculation abounds, everything from a younger average age of cattle, to mismanaged implant strategies, to too much genetic selection for growth, and on and on.

The stars are still in the sky and there's no reason to panic. However, current demand and NBQA realities should serve as reminders about all it took to initially stem the freefall in beef demand. That includes everything from audits that provide targets to aim for and progress to monitor, to new product development, to an effective industry crisis-management plan, to advertising, promotion and education about beef. All these items are funded, wholly or in part, by beef producers for beef producers through the national beef checkoff.

Thus, one would think there would be no question about the need to raise the checkoff; only the amount of the uptick should be at issue. In September, the industry-wide Beef Checkoff Task Force recommended raising the checkoff rate to $2/head. It makes sense, just to stay even. Inflation has eaten away at what $1/head can buy in the past 20 years.

In fact, the Beef Promotion Operating Committee, which allocates checkoff dollars, denied $4.7 million in projects it believed should be funded in 2007 because there wasn't enough money. Moreover, the recommendation to raise the rate is necessary if the industry hopes to achieve its goal of increasing beef demand another 10% by 2010.