Advertise in Print | Subscriptions
Published February 15, 2011, 11:45 AM

Beef industry faces marketing, supply challenges

A decade ago, the U.S. beef industry faced a big challenge. Consumer demand was changing, and the industry had to change with it or risk further hits to beef’s popularity.

By: Jonathan Knutson, Agweek

A decade ago, the U.S. beef industry faced a big challenge. Consumer demand was changing, and the industry had to change with it or risk further hits to beef’s popularity.

But while progress has been made — think smaller, leaner portions and greater convenience in preparation — the job is far from finished, officials say.

“The industry is working at it. But there’s so much more to do,” says Ted Schroeder, a professor of livestock marketing at Kansas State University who has studied the beef industry for years.

Officials with the National Beef Cattlemen’s Association, a Denver-based trade group, say they’re fighting the good fight, putting money from the producer-funded beef checkoff marketing and research program to good use.

The industry is placing even more emphasis on convenience and value cuts, says Ellen Gibson, the association’s executive director of beef innovations.

And greater attention is being given to the so-called “Millenials,” or the roughly 80 million Americans born from 1981 to 2000, many of whom know little or nothing about cooking, she says.

The industry also is considering whether to step up its marketing to America’s growing Hispanic population, she says.

The number of American Hispanics increased from 14.6 million (4.7 percent of the total population) in 1980 to 47.8 million (15.5 percent of the total population) in 2010, according to the U.S. Census Bureau.

Those numbers are projected to reach 59.7 million and 17.8 percent by 2020 and 102.6 million and 24.4 percent by 2050.

Don’t underestimate need

Marketing may not seem all that important right now: prices received by cattle producers have improved and demand for beef is relatively strong. As the U.S. Department of Agriculture’s 2010 year-end national cattle sales summary put it: “Demand for all classes of cattle has come through the holidays without a hitch and the future seems bright for 2011 and beyond with rapidly improving exports and tight supplies,”

But the beef industry better not get overconfident, Schroeder and others say.

- Americans on average continue to eat less beef, and no immediate turnaround is expected.

- The domestic market remains dominant, accounting for roughly 90 percent of demand — a fact obscured by growing exports.

“The export market has really saved the industry’s tail,” Schroeder says.

The United States exported $2.8 billion of beef in 2009, up from $1.6 billion in 2006, USDA says.

The U.S. Meat Export Federation estimates 2010 U.S. beef exports at a record $3.95 billion. The U.S. dollar’s declining value makes American products cheaper for foreign consumers.

Beef, whether exported or sold domestically, remains an economic cornerstone of the Upper Midwest, pumping billions of dollars into the region’s economy every year.

For instance, South Dakota producers in 2008 had cash receipts of $1.7 billion from cattle and calves. That was 20 percent of cash receipts from all crops and livestock in the state.

Americans eat more chicken, 83.8 pounds per capita, than any other meat. Per capita consumption of beef ranks second, at 60.1 pounds, according to USDA.

American per capita chicken consumption surpassed per capita beef consumption in 1993, the American Meat Institute says.

No quick turnaround

Don’t expect American per capita beef consumption to increase anytime soon, says Tim Petry, livestock market economist with the North Dakota State University Extension Service in Fargo

“I can’t see going back to 2005 meat consumption for the foreseeable future,” he says.

Since 2005, high corn prices — in no small part a result of increasing ethanol production — have forced the U.S. livestock industry to get smaller, reducing meat supplies, he says.

Corn currently fetches about $5.50 to $6 per bushel at area elevators.

“The livestock industry was used to cheaper corn. It was built on $2 (per bushel) corn. The industry had to downsize to get prices (received by producers) back up,” he says.

Per capita beef consumption reflects the supply of beef, says Kim Essex, senior vice president of consumer marketing for the National Cattlemen’s Beef Association.

When less beef is available, Americans eat less. So it’s significant that America’s per capita net beef supply — which takes into account both exports and imports — is the smallest since 1952, she says.

America’s cattle herd of 92.6 million is the smallest since 1958, reflecting higher feed costs, USDA says.

Further, the number of young, female beef cattle held for breeding stands at 5.16 million, down 5.4 percent from a year earlier.

“Increasing consumption may be a laudable goal,” but doing so doesn’t seem realistic given current conditions, Petry says.

Whatever happens with the domestic market, growing foreign demand for U.S. beef bodes well for the industry’s future, he and others say.

For what it’s worth, USDA estimates that the size of the U.S. cattle herd — and American per capita beef consumption — will begin rising by 2016.

Beef, health and families

Promoting beef to the American public has long been an industry priority, a response to societal changes.

Older Americans remember how things used to be: Men went off to work, most women stayed home to care for house and family. The stay-at-home moms frequently cooked beef products for their family’s evening meals.

But beef’s popularity lessened as more women began working outside the home. In 1950, 33 percent of women were in the labor force, according to the U.S. Bureau of Labor Statistics.

The rate rose to 50 percent in 1980, 60 percent in 2000 and has held more or less steady since then.

Growing concern in the 1980s and 1990s about the health risks of cholesterol also hurt beef’s popularity.

The twin trends weren’t exactly a secret.

“Twenty years of declining demand has plagued the beef industry,” says a 2000 study funded by the beef checkoff and conducted by Schroeder and other researchers at Kansas State University.

Among the study’s findings:

n Health reports linking cholesterol and beef consumption weakened domestic demand for beef by 0.6 percent annually from 1982 to 1999.

n The growing number of women working outside the home cut into beef consumption by 1.3 percent annually from 1992 to 1999.

By all accounts, the industry has responded to the health concerns and greater number of women working outside the home.

Visit the meat department of a modern supermarket and you’ll see many changes from a decade ago, says Scott Van Camp, meat supervisor for the Hugo’s supermarkets in Grand Forks, N.D.

Beef products generally are leaner and more convenient to prepare than ever, he says.

The beef industry also is promoting formerly little-known cuts of beef such as flat-iron steaks, which come from the shoulder, Van Camp says.

‘Essentiality’ of beef

The industry has concentrated on persuading consumers that beef “is a great combination of taste and nutrition,” says Essex, with the National Cattlemen’s Beef Association.

The effort includes “the Power of Protein” campaign, which stresses the health benefits of eating beef.

Going forward, the industry wants to promote what she calls the “essentiality” of beef.

“We don’t want to be seen as interchangeable with other meats,” Essex says. The goal is getting across the message that “beef is different, beef is valuable” and that it’s a “must-have item.”

Schroeder, the Kansas State University livestock marketing professor, says the issue of food safety is increasingly important to consumers and needs to be a priority for the beef industry.

Essex says keeping beef safe is crucial and fundamental, but doing so doesn’t differentiate beef from competing products.

The beef industry also continues to stress the importance of convenience, says Gibson, with the National Cattlemen’s Beef Association.

Among other things, research is under way into technology that would allow beef roasts to be prepared in the microwave, she says.

While nobody expects U.S. per capita beef consumption to rise in the near future, don’t give up the possibility of it happening eventually, Essex says.

“There’s room in a healthy diet to eat more beef,” she says.