Close references the ‘Ground Beef Nation’ at NCBA
Nashville, Tenn. – “The changing taste and preference of consumers and the conventional approach to beef production in the U.S. is being questioned,” said Dan Close, vice president of Food and Agricultural Research for Rabo AgriFinance at the 2014 National Cattlemen’s Beef Association Conference.
Close, who leads the Food and Agricultural Research Group of Rabo AgriFinance, discussed their report, titled “Ground Beef Nation,” on Feb. 6.
The report shows U.S. consumers are purchasing more ground beef than any other beef product.
“The beef industry needs to align with what consumers want and what they are purchasing,” Close added.
“We are working with changing preferences and prices that cause many consumers to downgrade their beef purchases,” added Close.
For the ground beef report, Close used research from the beef checkoff, as well as doing his own polling of U.S. retailers on what percentage of their total beef consumption was in some form of ground product.
“The conclusion from these polls was that a very consistent 60 to 62 percent of total beef consumption is ground beef,” stated Close. “It didn’t matter what stores were featuring or what ads were promoting, the number one selling item in each store weekly was a 93/7 blend of ground beef.”
Close added, “The U.S. cattle industry continues to focus on a high quality, high grade muscle cut item. We are seeing a growing imbalance between what consumers want to buy and what the beef industry is producing.”
“This is one of the issues the beef industry is going to have to address is if we are going to regain and restore market share. Over time, we need to look at beef products on a cut-by-cut basis and see where those price partings are starting to show up,” declared Close.
Starting in the 1990s, the beef industry strived to produce a quality eating experience every time for its consumers.
“When we look at the last 10 years, there’s easily been a 20 percent increase in the percentage of choice and prime carcasses in the grading mix,” said Close. “Today, if the issue was quality alone, we wouldn’t continue to see this erosion in per capita consumption.”
“When looking at the price disparity between the other protein sources and beef, the industry has issues, and we are pricing ourselves out of the market,” said Close.
Overall beef demand is still very good, but he explained that all beef prices have escalated at a faster rate than choice beef prices, making it very compelling evidence that consumers have downgraded the items that they are purchasing everyday to meet their beef needs.
“The transition has occurred where ground beef prices are rising at a faster rate than steaks,” said Close. “The shift in price relationship between steaks and ground beef is far from being resolved, and additional price narrowing between these two items will continue to occur.”
The components of conventional ground beef include the trimmings from both domestic and imported lean cow and bull slaughters and 50 percent from fat trimmings.
“Ground beef is not an inferior product, but it is made up of lower value components,” said Close. “Over the past five to six years, there’s been a very consistent pattern with the trimmings prices trading at a premium price.”
He added, “There’s something dynamic changing here, and it needs to be evaluated. There is room to take more of our muscle cuts and grind them into ground beef products.”
“Today, 75 percent of consumers have no idea what they are going to have for dinner at 4:30 in the afternoon,” stated Close. “When looking at food items that are useable in a 30 to 45 minute window, the majority of options call for ground beef or a ground meat item of some kind.”
“Ground beef is going to be a key driver in the future beef market,” added Close.
Close also pointed out the decline of cooking skills of the millennial generation.
“Their limited cooking skill forces them to only a handful of items that they are comfortable with cooking,” said Close. “That, too, is going to be a driver in this train going forth.”
Close stated that the bottom-line for the beef industry is that domestic and international markets of conventional beef sources and lean trimmings are going to be limited. Ground beef is going to have to come from the fed beef supply.
“There’s clearly a need for the top end of beef products, but there is also an increased need for lower grade products of ground beef,” stated Close.
“We need to start targeting specific animals to be used primarily for ground beef and meet that demand,” said Close. “These animals will be finished at a lighter weight, but the rib and loin area can still be harvested for select to low choice products, and the remainder of the carcass can be used for ground beef.”
Global beef demand
At the second half of 2013, a radical decline in the number of slaughter cows was seen. There are expectations that these numbers will continue to decline in 2014 and very likely into 2015, creating a shortage of supply of conventional domestic lean beef in the next couple of years.
Australia has seen the largest amount of slaughter animals in the past 34 years, due to the severe drought that has occurred. This high slaughter rate has allowed them to start exporting more beef to China, and this past year, their exports were up 635 percent.
“The original amount exported to China was a very small root number, but a trade relationship and precedence have been established, and there is only room for it to grow stronger with time,” commented Dan Close, vice president of Food and Agricultural Research for Rabo AgriFinance.
Experts are concerned that, with the increased amount of beef to China from Australia, the amount of beef that Australia can send to the U.S. might be limited, which could cause the beef market to become more expensive.
“The world dynamics are radically changing, and consumer tastes and preference have clearly changed to a ground beef diet,” said Close.