I RECENTLY wrote a column about soaring beef prices (Feedstuffs, May 5) and the not-so-good effect it might have on beef's ownership of the retail meat case.
In it, I quoted Rabo AgriFinance cattle economist Don Close, who presented an extremely provocative bit of research at the recent Cattle Industry Convention in which he suggested some changes in how the beef herd is handled.
Close said, "Under the existing business model, the U.S. cattle industry manages all fed beef as if it were destined for the center of the plate at a white-tablecloth restaurant. The industry is, essentially, producing an extraordinarily high-grade product for consumers who desire to purchase a commodity. More than 60% 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."
To cut to the heart of the matter, do we start breeding to maximize ground beef production instead of better-quality middle meats?
I questioned whether we drop the higher-margin product and try to shore up market share with a very low-margin commodity or if we should start producing for Asian countries since demand for the best cuts seems to be growing quickly in China, Japan and South Korea.
In a later conversation with Close, he told me something to the effect of: "Almost, but not quite." He gently suggested that I had jumped to the wrong conclusion about how he thought the U.S. should handle the beef cattle herd.
"I'm talking about dividing that calf crop in half, about 50/50," he said. "For the top half of that gene pool, we continue to manage it as we have been for better quality and target those cattle for the highest-quality market possible.
"It's for the remainder of that calf crop that I'm proposing we do something different — that we shorten up time on feed, leave them out (in the pasture) longer, let them grow some more," Close explained. "Even in that sector, I'm not talking about grinding the whole thing (into ground beef). The rib and the loin could still be part of the retail and second-tier steakhouse business."
I was still a bit confused. Growing the market usually means making more product available at a better price. With the herd size not changing much in the short term, how can we put more product out there?
Close's explanation was simple: "If we're talking about the entire fed beef supply as it is today — a rib and loin is about 20% of the carcass — we'll still pull the rib and loin. The total supply of middle meats going to market would be about the same. The share of the carcass that's eroding in value and being forced to be marketed as an alternative source for grinding supplies — that's the portion of our meat supply that I'm saying we should handle in a different way if it's going to the ground beef market."
He added that "growing that half of the herd longer" actually would cut the feeding period (days on feed) to 90-120 days. Then, he said, "we would have a lighter carcass weight — but not significantly lighter."
To clarify his position, Close said, "If you take some particular items — such as briskets, flank steaks and short plates — there are still a number of items that could be sold as the primals they are today. Clod on chucks and whole rounds are what we're really struggling with and what to do with them.
"I was looking at the percentage of ground beef going to market and the changing consumer consumption patterns; that was what I was trying to convey," he explained. "I never approached this as the Holy Grail, though. It has created a lot of debate, and that's good. Are their refinements and adjustments? I'm all for that."
So, there you have it: a clarification of what Close wanted to convey when he stood up in front of hundreds of cattle producers and suggested that there might be a better way.
Look at that calf crop a little more carefully, select those animals that should generate a better-quality product and treat them as you do today. For those animals that might grade out a little lower on the quality spectrum, maybe there is a more cost-effective way to manage them.
*Chuck Jolley is president of Jolley & Associates, a marketing and public relations firm that concentrates on the food industry.