There are too many moving parts to say with certainty how much the furor over lean finely textured beef (LFTB) will ultimately cost beef demand and for how long. Related economic dominos continue to fall, though.
“Estimates are that roughly 10% of beef on a carcass would fall into the fresh 50% lean category (the one most impacted by less use of LFTB). If you use that 10% assumption and basically a $40/cwt. falloff in the value of that product during March, that amounts to essentially a $4/cwt. value pullback on fed cattle. That explains a decent portion of the pullback on fed cattle prices during March,” says Glynn Tonsor, livestock marketing specialist with K-State Research and Extension.
From a demand standpoint, Tonsor explains, “One of the things I’ve found in other studies, such as the impact of media attention to animal welfare issues and meat recalls, is that total (aggregate) beef demand is typically affected for one to two quarters. That’s still multiple weeks or months, but it doesn’t persist for five years. I tend to think consumer demand reaction to this story in this context will also be relatively short lived.”
Tonsor believes the murkier part of the equation revolves around potential labeling requirements and other possible ramifications that increase the cost of doing business.
“At the extreme, if we quit using LFTB, and I don’t expect that will happen, but if we take that away from the toolbox, the cost of business goes up. If we add labeling, that’s an added cost, but not as expensive as removing it, and there are a lot of things in between,” Tonsor says. “I think the net impact is that the cost of producing ground beef and the cost of beef overall is going up from this, and that probably will have some staying power that goes beyond the negative demand aspects that last one or two quarters.”