The beef industry's fast-forward button has been pushed. Over the past six years, we've experienced more change in the beef industry than in the previous 60.
We've observed ever-increasing consolidation of the feedlot, packing and retail sectors, fueling considerable debate throughout the industry. Vertically and horizontally coordinated production systems (alliances) have emerged.
After years of talking about it, value-based marketing is here. More than 300 new, convenient, tasty beef products have reached the marketplace, and we've learned that brands are important to consumers. Beef demand turned upward for the first time in 20 years.
On the genetic side, there is increased emphasis on carcass traits. DNA markers for tenderness, marbling and ribeye area have been identified. Ultrasound data is being incorporated into genetic evaluation programs.
We've observed increasing use of hybrid or composite bulls as a means of simplifying crossbreeding systems while still harvesting a significant amount of heterosis.
Recalls of pathogen-contaminated beef have directed industry resources to much-needed research on intervention strategies.
Instruments that can accurately assess yield grade at line speed have been developed.
The events of Sept. 11 altered many facets of American life; how they may impact our industry long-term is yet to be determined.
So What's Next?
The rapid-fire events of the past six years make one ponder what the future holds for us. Whether we like it or not, the structure of the beef industry is shifting to a more industrialized model of production.
This doesn't mean the beef industry will vertically integrate to the extent of the poultry industry, but coordination between and within segments will grow.
This is occurring in all sectors of the food industry because consumers have gained a greater voice. They're demanding with their purchasing power unique products and new modes of delivery. More control and coordination is required throughout the food supply chain to meet these demands.
Globalization is also driving the need for increased coordination. By the end of the decade, 80% of the fed cattle could be marketed in various forms of value-based, coordinated systems.
In 1998, branded products accounted for 10-12% of beef sales. By 2010, branded products could account for 60% of beef sales. Some analysts predict that branded products will eventually make up 80% of the market.
The trend to case-ready beef, where virtually all fat and bone is left on the packinghouse floor, will have a major impact on the industry. Muscling will play a bigger role in determining value because of its impact on dressing percent and red meat yield.
There will be increasingly greater yield grade premiums and discounts. Carcasses fatter than YG 3.5 may be severely discounted. Demand for YG 2 cattle that quality grade Low Choice or High Select will increase. Demand for Mid-Choice or higher beef for upscale domestic markets and export will continue at its current level.
In spite of vigorous debates over the merit of USDA quality grading, its use will continue but may be augmented by instrumentation capable of classifying carcasses into tender and tough categories. The eventual hope would be to fine-tune the technology in order to numerically score carcasses for tenderness and price them accordingly.
The recently formed National Beef Cattle Evaluation Consortium will take genetic evaluation to a new level, generating EPDs for economically relevant traits such as tenderness, cow maintenance, days-to-market endpoint and certain reproductive parameters. DNA information from the National Carcass Merit Project will be combined with phenotypic data to enhance the accuracy of EPDs. The consortium also plans to develop decision support systems that will combine EPDs into an economic index that can be customized to a specific production and marketing scenario.
Recent research indicates that sorting semen into male and female cells may be economically feasible across the industry within the decade. Widespread application of cloning will come later.
DNA technology can now be used for parentage verification, sire identification of calves conceived in multiple-bull pastures and color genotyping. Future applications will include verification of breed composition and characterization of calves for their potential feedlot and carcass performance.
Food safety concerns will not go away, and animal welfare issues will heighten as they have in the poultry and pork industries. Guidelines developed by McDonald's, Burger King and Wendy's for their suppliers have set a precedent that will be adopted by other food companies.
It seems clear that consumers are going to want to know more and more about how their food has been produced and processed. Identity preservation (source verification) will become an essential component of U.S. beef production, as it already has in Europe and in some coordinated systems in the U.S. Biosecurity measures will be tightened to minimize the risk of foreign animal diseases such as foot-and-mouth disease and bovine spongiform encephalopathy (BSE).
In summary, specification production will be a way of life in the “new beef industry.” Unless their cattle fit someone's specs, it may be difficult for producers to market them except at significantly discounted prices.
Low-cost producers will be among the most profitable as they have been in the past. It will become increasingly advantageous, however, to participate in some type of system that rewards specification production and added value.
There will be room for both small and large participants in the new industry. But it will be necessary to develop a mindset of “interdependence” and a willingness to relinquish some measure of the independence upon which we have long prided ourselves.
Harlan Ritchie is a distinguished professor in the Michigan State University Department of Animal Science in East Lansing.