The moderator at a recent symposium for West Coast Wagyu breeders started the event by posing a question: how do we make Wagyu a sustainable breed and not just a novelty?
I was fortunate enough to be among those on the panel of speakers. So when it came my turn, I put aside my prepared remarks and attempted to answer the question. I emphasized then, as I do now, that most of my remarks would apply to all breeds, from those with the largest numbers down.
Like most breeds, the Wagyu breed has attracted a variety of people to it. Most are commercially minded but only a few run truly commercial operations. One obvious issue is size. There are thousands rather than millions of Wagyu cattle in the U.S. One panel member said there were 24,000 half-blood Wagyu cattle on feed at any one time.
Compare that to the 10 to 12 million cattle on feed in feedlots of more than 1,000 head of capacity. So the Wagyu breed needs to build numbers and integrate its genetics, when appropriate, into the commercial beef herd.
Marketing and creating value
Most of my remarks were focused on marketing and creating value. I reminded them that they are breeders of an end product, not just propagators and multipliers. They're not just in the beef industry but also in the food industry. They must remember that all money flows through the beef industry from consumers, that they compete for consumers' food dollars and that if they lose consumers, they lose their business.
That means they can't breed cattle without finding out if there is a market for their product and what end users really want. Above all, they must market a product that has value and I explained that the definition of “value” is “quality vs. price.” So, if they charge a premium price, they must guarantee a premium-quality product. Alas, some producers of grass-fed beef have failed to provide true value and have failed, I told them.
Wagyu beef has already demonstrated some consumers' willingness to pay big premiums. But I reminded the audience that there is intense competition from other premium-beef programs, some operated by the major packers. The name Wagyu alone won't sell the beef. There's also Australian Wagyu beef, some of which goes to high-end restaurants like Ruth's Chris.
Breeders and those selling Wagyu beef also must focus on selling more of the carcass at a premium, I told them. Too often, breeders think of middle meats when making progeny selections. Those middle meats have to sell at a premium to offset the cuts that sell at a loss. That, of course, was also true for commodity beef. But the beef industry in recent years has done a good job in adding value to the lesser cuts and in developing new cuts such as the flatiron steak.
I also reminded them that importers of European breeds in the 1960s and 1970s thought they had the answer. Where are they today? Conversely, the Angus folk quietly and slowly worked on improving their breed's carcass and meat quality. They got the breed closer to end users than any other breed. The result has been the most successful branded-beef program in history.
I suggested that future growth of the breed might depend more on combining Wagyu genetics with other genetics than in producing pureblood Wagyu beef. That will always be the tiniest of niches. But other Wagyu beef will be subject to the broader macro-economy.
A tougher high-end market
Right now, there's clear evidence that Americans are eating out less and eating more at home because of less disposible income and thus tighter food budgets. This means the market for high-end restaurant beef might not grow for a while.
Consumers might also want less marbled but still consistently tender, juicy beef. The narrow price spread this year between the Choice and Select cutouts suggests beef demand is softer for higher-priced, more marbled beef than for other beef. It's also seen in the relatively modest premium for Prime-graded beef.
Finally, I suggested that those breeders who get closest to the final market for their beef will be more likely to succeed, and that the best genetics will be those that maximize the value of the carcass. I would like to think that this message applies to every beef breed in our national herd.
Steve Kay is a contributing editor to BEEF magazine, and editor and publisher of Cattle Buyers Weekly (www.cattlebuyersweekly.com).