U.S. becomes a "Ground Beef Nation"

Feb 7, 2014

—Consumption shift requires better cost control

Changing consumer preferences and a production model tailored to the production of top-shelf steaks has put the U.S. cattle industry in a position of losing market share to competitive proteins, according to a new report from the Rabobank Food & Agribusiness Research (FAR) and Advisory group. The report, “Ground Beef Nation,” notes the industry needs to change the way beef is produced in order to remain competitive in the protein market.

“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 table cloth restaurant,” notes Rabobank Cattle Economist Don Close.

“The industry is, essentially, producing an extraordinarily high grade product for consumers who desire to purchase a commodity. 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.”

The report goes on to explore the trend of changing consumer preferences and the role pricing plays in the notable decline in beef consumption. The industries that produce competitive proteins, such as pork and chicken, have grown and become more efficient, making the products more readily available at competitive prices.

“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 priced items when purchasing beef,” Close says.

In the report, Close discusses beef consumption decline, sharing that it has decreased from a high of almost 95 pounds per person in the 70s, to just 54 pounds per person last year. The decline in the U.S. cattle herd has also followed the same trend, with a 1970s peak of an estimated 134 million head to just 87.8 million last year, the lowest in more than 60 years.

In addition to the change in beef consumption, retail chicken prices increased about 24 percent from 2000 through 2013, while pork jumped 41 percent, according to Close. Over the same period, all-beef prices went up 78 percent, with the cheaper cuts becoming more popular for consumers.

“The industry must change to a production model that determines the best end use of an animal as early as possible, in order to compete in a Ground Beef Nation,” notes Close. “A new system for end-use categorization that influences calf selection, cattle management, production costs and feeding regimen throughout the life of the animal is vital to keeping beef competitive with other choices at the meat counter.” Close recommends raising between a third and a half of the animals primarily for ground beef.

The full report is available exclusively to clients of Rabobank, Rabobank, N.A. and Rabo AgriFinance. Media can obtain the full report by contacting Sarah Kolell at Rabo AgriFinance or Jessup Wiley at Rabobank, N.A. — Traci Eatherton, WLJ Editor