Here’s this week’s market report: Choice beef lower, futures sliding, beef demand lackluster and disappointing. Sound familiar? It has been a broken record in 2016. The after-Easter, spring grilling boom to boost beef demand has been slow to develop.
On the other hand, the supply side has seen production up by approximately 2.5% in 2016, but slaughter numbers have been up by only 0.6%. Economics and genetics have changed the supply side of the equation. Increased carcass weights and more tonnage from similar numbers is a trend that is not going away.
The reality is that if we are going to enjoy improving prices, we have one option—build beef demand. From a business perspective, that is no different than most businesses; they plan on growing profits by growing demand, not limiting supply.
Yet, unlike most businesses, we have always struggled with how to grow demand. The entities that have the most direct contact with our consumer not only sell competing products but are the very definition of margin operators. Demand or price doesn’t matter to them, it is simply about the difference between the buy and the sell—the margin.
Thus, it became obvious that if we didn’t do something, we would always be at a competitive disadvantage to other proteins that were integrated and structured vastly differently than the cattle business. The cow-calf segment of our industry, being the only fixed-cost producer in the system, was the segment that benefited the most directly or harmed the most egregiously by changes in demand.
As a result, we came up with the beef checkoff program—government controlled, government regulated. Yet with all the limitations, it was a way to engage the consumer and the success of the checkoff was significant and tangible.
One could argue that the checkoff’s success, ironically, has also been a failure in the sense that it provided us with the illusion that we were addressing our long-term competitive disadvantage relative to building beef demand. Here is the reality: The checkoff didn’t breach the gap, and structurally it ensured that the impact of the program would actually decrease over time. It also took some time, but in addition, it forced the pork and poultry industries along with the opponents of our industry to sharpen their game.
Ultimately, it is the responsibility of the industry and its leaders to address our shortcomings relative to building beef demand and it should be the primary goal of every industry leader. Yet, if history has taught us anything, it is that while this industry’s structure evolved to improve efficiency and is currently transitioning to also improve quality, it is not capable of supporting and building demand relative to our competition. How many producers have building beef demand as part of their strategic plan? That is what makes us different from most other businesses.
Until the industry comes up with a structure that allows us to build demand, it falls on the back of all of us as individual producers. In the brave new world of social media, what would happen if 700,000-plus producers were posting and talking about firing up their grills and eating beef? What would it mean if they were all talking about our values and our impact on the environment, the economy and sustainable production?
We all wake up with the goal of making our operation a little better than it was the day before. How many of us are truly working to affect the one thing that has as much direct impact on our profitability as anything we can do—beef demand? Maybe the conclusion we have all avoided is the most obvious one—building beef demand is the business of everyone in our industry.
The opinions of Troy Marshall are not necessarily those of beefmagazine.com and the Penton Agriculture Group.
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