The U.S. cattle industry needs to change the way it produces beef if it is to stay competitive in what has become a "ground beef nation,'' according to Don Close, an economist for the Rabobank Food and Agribusiness Research and Advisory Group.
In a report, Close says producers continue to overfocus on producing quality steak while cost-conscious Americans are switching to other proteins and eating more ground beef in the form of burgers, sauces and tacos at home and in fast-food restaurants. The report was released on the eve of the opening of the National Cattlemen's Beef Association's annual convention, in Nashville.
"The industry is, essentially, producing an extraordinarily high-grade product for consumers who desire to purchase a commodity," Close wrote. "More than 60 percent of U.S. beef consumption is ground product. If the U.S. cattle industry continues to produce ground beef in a structure better suited to high-end cuts, the result will be continued erosion of market share."
Close points out that annual beef consumption in the U.S. has plummeted from a high of just under 95 pounds per person in the 1970s - when the country's cattle herd peaked at an estimated 134 million head - to about 54 pounds last year, when the inventory of cattle and calves fell to 87.8 million, the lowest in more than 60 years. And while quality and convenience are important, Close says cost is the "most likely driver of the continuous decline."
Retail chicken prices increased about 24 percent from 2000 through 2013, using non-deflated numbers, while pork jumped 41 percent, according to Close. Over the same period, all-beef prices soared 78 percent. And while consumers are continuing to demand beef, they are spending their discretionary food dollars on cheaper cuts.
"While beef demand has held up reasonably well despite higher price increases relative to alternative protein sources, changing tastes and preferences are causing shoppers to choose more competitively prices items when purchasing beef," Close says.
Close says if the industry is to become more efficient and competitive, it must determine the "end use" of young cattle as early as possible, and then manage the animals specifically toward that goal, with different feeding programs. He recommends raising between a third and a half of the animals primarily for ground beef.
While changes in the commercial feed yard sector would be "minimal" under the system he proposes, Close says the meatpacker would feel the greatest affects ``because it would alter the way cattle are currently priced." It could also force ``radical changes in the fabrication process," he says.
"Early identification of end use, and managing the choice/prime and select grade animals in a manner consistent with their best end use, is key to the U.S. cattle industry developing a long-term, sustainable future," Close writes.