Don Close, senior analyst at Rabo AgriFinance specializing in beef, gave a presentation at the Kansas State Ranching Summit in August on what lies in store for the beef industry on both a global and domestic scale. “I cannot think of a time when I have been more optimistic for animal agriculture, specifically the North American beef industry, as I am right now,” he said.
Go global
Close said from a global production scale, three up-and-coming countries to watch are Mexico, Indonesia and India.
Mexico
He said Mexico is improving rapidly in developing their commercial cattle feeding and processing systems. “The technology that they are implementing in beef plants is superior to anything I see in the states,” he said. Close advised U.S. beef producers to stop thinking about the U.S. meat market exclusively and start thinking about the North American market collectively, because Mexico is going to become a big part of that conversation.
Indonesia
Close said Indonesia’s ag policy is volatile, but their import power is making a difference on a global level. In 2017, Indonesia opened an import quota of 50,000 metric tons of carabeef, or water buffalo meat, from India, which sells for about 70 percent of the international selling price of 90 percent lean ground beef. They increased that quota to 100,000 metric tons in 2018. Historically, Indonesia has been a strong importer of Australian beef, but with the success of carabeef, Australian imports are taking a hit.
India
India has a population of 1.4 billion people and a cattle inventory, including water buffalo, of 300 million head. Since 80 percent of India’s population is Hindu and the Hindu-controlled government is “absolutely anti animal agriculture to the point where in some provinces, even for being caught in possession of fresh meat, you will be jailed,” they import little to no beef and export quite a bit. Close said India is developing a niche as the supplier of commodity product, which changes the dynamics of world beef exports. “North America is the ultra/high-quality producer; India is the low end of commodity; and if you take the other major beef-exporting countries, they will be constantly tugged between doing cut-cost to compete with the low-end producer and adding all the bells and whistles to compete with North America.”
Changing consumer behavior
Convenience, Close said, is the highest priority factor in today’s consumer market. He said the demand for transparency, as well as the demand for “the story” behind the food – whether they understand enough to know if the story is true or not – has increased. He also said 2018 is the year that millennials have the greatest buying power of any generation. That alone is changing consumer trends. Close shared a few statistics on consumer choices that affect the meat market:
- $1.5 trillion per year is spent on food, with just over half going to meals away from home.
- 25 percent of U.S. shopping malls are expected to close within five years.
- Meal delivery from conventional restaurants is the fastest growing segment of the food industry.
- As online shopping and entertainment streaming have become popular, more consumers are electing to spend time at home.
- Expenditures for meals at home are expected to regain the majority over meals away from home.
What does this mean to the beef industry?
Online meal kits, one of the biggest trends of 2018, provide an opportunity to introduce beef offerings to light or non-beef eaters.
Close said the average consumer limits their meat purchases to roughly six different cuts of meat, because that’s their repertoire of what they know how to cook and what they’re comfortable with making. They are not going to spend money on meat that they don’t know how to fix, but the meal kits come with step-by-step instructions on how to cook everything, thus eliminating that concern. “The ability to use a number of the underutilized cuts of beef in items and give step-by-step instructions on how to cook an item [the consumer] would never buy on their own, would increase the value they have in those underutilized beef cuts and cause a direct increase to overall cutout value.”
Another change Close foresees in the beef market is a growth in diversity of product. Online ordering gives grocers an opportunity to market a wider variety of products that come with labels like ultra high-quality, breed-specific, natural, NHTC (non-hormone treated cattle), organic or grass-fed. Close said the price spread and premium and discount schedule used to price beef, which today is based mostly on yield grade differences and quality grade differences, will change to include market factors like all-natural, NHTC and other extra features. “It’s going to be just like stack traits in seed corn,” he said. “We can add as many of these characteristics as we want, and our conventional price spread of cattle quality will be rewired because of this drive for quality, but I don’t know if it’s so much a premium for good cattle as it is that we’ve finally found a way to dock the absolute heck out of that Plain Jane commodity steer.”
Close said with the current momentum of a projected five-year period of herd rebuilding, a growing beef demand both globally and domestically, and expanding export opportunities, there is a real opportunity for growth. “The industry is at a crossroads,” he said. “We’ve got the momentum on our side. We can use this leverage opportunity to create our own way into the changing consumer environment, or we can do nothing. You’re going to have to decide the answer to that.” 
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Carrie Veselka
- Associate Editor
- Progressive Cattleman
- Email Carrie Veselka
PHOTO: Don Close (left) participates in a panel discussion with speakers Tyson Johnson (Sooner Cattle Co.), Mark Gardiner (Gardiner Angus) and panel moderator Matt Perrier (Dalebanks Angus). Photo provided by Angela Denton.
