The U.S. cattle industry will need to make changes in order to meet the ever-changing demands of consumers. Close says the fast-paced livelihoods and cost-cautious Americans are shifting the future of beef into ground form. But others involved with the industry may believe otherwise.
Released earlier this year, the "Ground Beef Nation" report says in order for the beef industry to remain competitive with other proteins they need to focus primarily on producing ground beef. The controversial topic has initiated a lot of discussion within the beef industry and media outlets – just as Close had hoped it would.
"I am looking at it from the view point that the consumer is always right. If the data is showing that 60 percent of beef consumption is ground beef, the industry needs to find a way to provide the product they want," Close says.
Mike Miller, senior vice president of global marketing and research for the National Cattlemen’s Beef Association says the demand for ground beef is strong, however, so is the demand for steak.
"The market overall does a pretty good job of discovering the best value for the beef and sometimes ground beef is a great value, but it isn’t always the best value for the entire carcass," Miller says.
The packing industry's job is to discover the best value for all the cuts of beef, he says. If the market is pushing the industry toward ground beef then the necessary changes will be made. Overall the market does a good job signaling producers to what they should strive to produce.
"I think we will always have a strong demand for the whole muscle cuts," Miller says. "This is where our industry gathers the most margin, and there is a strong demand for these cuts domestically as well as nationally. I think there will be a balanced focus on these products, but what will win out will be our continued focus on a very high quality beef product that we can sell to the U.S. as well as the world."
Watching the trends
The idea of America becoming a ground beef nation was founded upon Close’s personal observation of consumers at the meat counter, his involvement in the beef industry and a recent trip to Australia. During his trip to Australia he witnessed excessive drought problems and liquidation of millions of cattle, similar to what had been seen in the U.S. He began to question what Americans would do if they had liquidated cows in the U.S. and in Australia, a huge source of imports, what would Americans have? Where would they get it? From there the research spiraled.
The report goes on to say that the beef industry is focused on producing a high-grade product when all the consumers want is a commodity. The majority of beef cattle are managed to grade choice while most of the total beef is consumed as ground beef. This current practice is a waste of resources and will result in continued loss of market shares for U.S. beef, nationally as well as abroad.
Gary Brester, a professor in the department of agricultural economics at Montana State University, says he disagrees with some of the statements made about the current beef industry's practices.
"Why would someone intentionally waste resources?" Brester says. "If you’re a feedlot operator you don’t know what animal is going to make prime or choice – it’s an uncertainty. It doesn’t mean you wasted resources; you just didn’t know how the animal was going to turn out. It’s easy to say we should have done this differently after the fact, but it is doing it before that is the hard part."
Brester believes the bigger issue mentioned in the report is dealing with imports. If America lost its imports, a lot of the ground beef available to consume wouldn’t be palatable. The U.S. beef industry is able to produce a higher quality animal that other countries can’t compete with. Therefore the value of the meat is far greater in exports than it is for grinding. The lean cuts of meat used for hamburger are imported from countries such as Australia and New Zealand. It is important consumers understand why beef is imported, he says.
"There is no reason why the market won’t adjust, if this is indeed what is going on," Brester says.
Expanding the grind
In the report Close introduces possible ways the beef industry could focus on producing ground beef. He says the technology today is questionable, but in order to make the necessary changes there would need to be additional genetic profiling of the animal to determine the end-use early on. The high calf-crop would be left for high-end retail sales while the lower performing calf-crop would go to produce ground beef. The lower performing calves would then be put on natural forage for an extended period of time to build size and muscle.
"I am not suggesting grind the entire animal," Close says. On this portion of calves, the high-end cuts that range anywhere from medium to high choice could supplement retail and some steak houses, he says.
Brester agrees that new technology could emerge, changing the way the beef industry produces beef. However, as far as the industry having enough incentive to stop producing high quality beef, he doesn’t see that happening.
This transition would require an industry-wide adjustment. It would take cooperation from packers and adjusted management practices from cattle producers and feedlots to produce cattle under the implied model. It would need to be introduced as a pilot project or tampered with by a small business, Close says.
The implied model would change the way producers manage their beef. It is not just a price driver, it is a different lifestyle, Close says. Some households have both partners working outside the home, and some have a new generational cooking style. The beef industry has to find a way to remain competitive with other proteins, he says.
A discussion for change
Close’s research found many indicators pushing for a change in the industry. He points out that his research wasn’t to find all the answers but to initiate a discussion that could eventually lead to an industry-wide change.
"We have seen U.S. cattle populations erode; without a doubt we have had the lowest cattle head in 60 years. The industry needs a wake up call and ask do we really want to continue down this path and continue on to see erosion in cattle? Or are we willing to do a self-examination to meet consumers' requests and see where that would put us as far as long-term growth and opportunity?" 
PHOTO
Rabobank cattle economist Don Close says American demand for ground beef should lead cattle producers to focus their feeding efforts on that commodity. Photo courtesy of Rabobank.
