Beef's future lies in genetics
Krissa Welshans 1 | Apr 12, 2013
BEEF prices continue to rise due to the lowest cattle numbers in several decades, and both consumers and the beef industry continue to try to finds ways to adjust.
Scott Brown, a University of Missouri economist, recently spoke about the necessity for the industry to use genetic selection as a tool to alleviate the pains of change.
"I don't want record prices because of the lowest beef supplies in 50-some odd years. I want the highest price because demand is pulling us along," Brown said at the March 12 midwestern section meetings of the American Society of Animal Science and American Dairy Science Assn. in Des Moines, Iowa.
He said history, economic modeling and consumer preference studies point the way to make that happen.
Analysts are good at looking into demand caused by price, income levels and available substitutions, "but there are other factors we economists don't often deal very well with: taste and preferences," Brown said. "Those can cause that demand function to shift either to the left -- which is not good news for the industry -- or to the right. Shifting that demand curve to the right is always important for us."
Marbling level is a clear indicator of probable consumer satisfaction, he noted.
"If we're at the low end of the marbling side, the probability of a consumer having a good experience is not very high," Brown said. "The last thing you want to do is spend money on what is perhaps the most expensive meat product and not have a good experience."
The question is whether there is enough producer incentive to aim for these higher marbling levels.
Brown said the Prime premium relative to Choice has been very attractive during a time of sluggish growth in the U.S. gross domestic product (Figure).
Besides more dollars, a real bonus for aiming that high is "a lot less volatility," Brown said.
"Certain times of the year, we probably have plenty of Choice cattle, and we're not paying much more for them relative to Selects, and at other times, we're tight on Choice supplies," he said.
Additionally, Brown pointed out that decisions by large-scale retailers spur variation in the signals.
"If I can target higher-end quality, higher than Choice, there are some real rewards in the marketplace," he said.
According to Brown, the Choice boxed beef cutout hasn't made it above $200/cwt., while Prime broke past $240/cwt. last year.
"Frankly, it takes that kind of movement if we're going to have an industry that can survive on $7-plus corn," he said.
Overall U.S. beef demand hit a bottom in 1997, followed by a brief recovery before sliding again since 2004.
"Changing that is a huge step in getting back to 100 million or 105 million head of cattle in this country," Brown said.
From 2004 to 2008, total consumer expenditures on Choice beef were fairly constant at $25 billion. However, in 2010, 2011 and 2012, "we've seen a nice increase," he said. "At the same time, we have not seen much recovery in Select expenditures."
Prime trends are similar to Choice.
"We often talk about consumers 'buying down,' going to McDonald's instead of those steakhouses," Brown said. "When you look at the graphs this way, you don't get quite that same picture."
Although U.S. demand remains uncertain, the global picture is a little brighter.
"In 2012, we were actually down in terms of U.S. beef export quantity, but if we instead look at it on a value basis, we're still growing," Brown said. "That tells me we're shipping more and more higher-valued products out of the U.S., and that's likely going to continue."
Half of the world's population will have 6% more disposable income in the immediate future, and Brown said there will be more demand for higher-quality products.
He pointed out that the beef industry's alternatives are simple: It can either plod along the same path or break out and follow a path like poultry did in the 1980s and '90s, or like the recent boom in the corn business.
"You may not like it from a policy standpoint, but they generated new demand for their products, and guess what? It's not going to go away anytime soon," he said.
Brown emphasized that the drought has given the beef industry a clear way to choose its destiny.
"We have a chance to rebuild that cow herd with better genetics, and I don't want to undersell that those who jump early are the ones who are going to get the benefits of adopting" that technology, Brown said.
Recovered property
In 2012, the Texas & Southwestern Cattle Raisers Assn. (TSCRA) special rangers recovered or accounted for stolen livestock and ranch equipment worth more than $4 million.
The Ft. Worth, Texas-based producer group was founded 136 years ago to fight cattle theft in Texas, a problem that still plagues ranchers today.
In 2012, more than 10,400 head of cattle and horses were reported missing or stolen to TSCRA, a large jump from the 7,600 head reported in 2011.
"Livestock and ranch equipment theft is a big problem in Texas and Oklahoma," TSCRA executive director of law enforcement Larry Gray said. "The good news is that a lot of these thieves get caught because of the hard work and dedication of the special rangers."
In 2012, TSCRA special rangers investigated 980 cases in Texas and Oklahoma primarily involving stray or stolen livestock. The total market value of all recovered livestock and property reached $4.475 million.
Convicted thieves received a total of 279 years of prison, state jail, probated and suspended sentences and deferred adjudication and paid more than $3.8 million in restitution, fines and court costs.
Though the association's rangers are commissioned by the Texas Department of Public Safety and the Oklahoma State Bureau of Investigation, they are not funded with taxpayer dollars. TSCRA membership dues, paid for by ranchers and landowners, provide funds for the rangers' salaries, equipment and training.
The 30 rangers are stationed strategically throughout Texas and Oklahoma. In addition to being trained in all facets of law enforcement, the rangers have in-depth knowledge of the cattle and ranching industry, making them a true asset to fighting crime in rural Texas.
The rangers are aided by TSCRA market inspectors, who collect brands and other identifying marks on 4 million to 5 million cattle sold at 104 Texas livestock markets each year.
The inspectors report their findings to TSCRA headquarters, where the information is entered into the nation's largest brand recording and retrieval system. This database is the first source a special ranger checks after receiving a report of a theft.
Gray said ranchers should brand their cattle to help prevent theft and to aid in recovery if their livestock are stolen; locking gates and counting cattle regularly are other tips to help prevent livestock theft.
Parking trailers and equipment out of sight of the roadway and marking saddles, tack and other equipment with the owner's driver's license number are not just deterrents but also aid in the recovery and return of stolen property.
Australian welfare rules
The Australian beef industry has drafted new rules, endorsed by the Cattle Council of Australia and the Lot Feeders' Assn., that are now open for public comment.
The proposed changes include pain relief requirements for dehorning, castrating and spaying cattle that are stricter than those currently in place for northern Australia.
Even though the changes are enforceable, Justin Toohey, the cattle council's animal health and welfare adviser, said the proposed changes are fair.
"Surgical operations may be occurring in the north where animals are not mustered for beyond 12 months, but I think that's quite a rare case," he said.
"Cattle are visited, on average, at least once a year, and that's the time that we're saying you must castrate and dehorn, and don't do it thereafter without pain relief," he added.
Toohey said he doesn't believe the new changes will affect very many producers, and "as far as southern Australia, I see virtually no difference" from current operations.
*Krissa Welshans holds a bachelor's degree in animal science from Michigan State University and a master's degree in public policy from New England College. Welshans has long been involved in agriculture and has worked with numerous agricultural groups, including the Animal Agriculture Alliance.
Volume:85 Issue:15