What's Ahead for the Beef Industry?

Looking into the future is tricky business. As renowned economist Peter Drucker once said, Forecasting future trends is a somewhat futile exercise. The best we can do is to take trends that are already occurring and extrapolate them into the future. The following trends and projections represent a consensus of numerous analysts in every beef industry sector, from seedstock to consumer. These trends,

Looking into the future is tricky business. As renowned economist Peter Drucker once said, “Forecasting future trends is a somewhat futile exercise. The best we can do is to take trends that are already occurring and extrapolate them into the future.”

The following trends and projections represent a consensus of numerous analysts in every beef industry sector, from seedstock to consumer. These trends, listed in no particular order, are likely to occur over the next few years and into the next decade.

  • Global markets will increasingly liberalize, assuming that developed nations, the U.S. and Canada included, don't adopt extreme protectionist policies. As developing nations become more affluent, their first demand is for more protein in their diets, especially animal protein. Driven by rising demand, total world meat production is projected to increase 13% by 2013. Beef is expected to parallel this overall increase.

  • The U.S. and Canada will continue to dominate world production of high-quality beef, primarily because they can more economically produce grain-fed beef. Plant geneticists, however, are capable of developing grain varieties adapted to non-traditional environments. This could enable nations such as Brazil and Argentina to become competitive in the global market for high-quality beef.

  • The world's water supply is becoming increasingly scarce. Water will be the “oil” of the 21st century. Expect water management to reach the top of the political agenda in the near future.

  • Consolidation will continue, especially in the retail, packing and feedlot sectors. Today, the top five supermarkets account for 50% of total supermarket sales. By 2010, this could be 75%.

    Meanwhile, the top 30 cattle feeding companies account for about 40% of the fed cattle. That could be more than 50% by 2010. More than 70% of fed cattle are processed by the top three packers; by 2010, they could be processing 80%.

  • Communication and coordination between segments will increase as the industry becomes more vertically “coordinated.” This needs to happen to remain competitive with other proteins.

    Be assured, however, that our industry won't vertically “integrate” like poultry. No single entity could invest the amount of capital — estimated at more than $6 billion — required to integrate from seedstock through retail.

  • Contractual arrangements between feedyards and cow-calf producers, and between feedyards and packers, will continue to grow. Such contacts are needed to ensure that retail and foodservice clients consistently meet their customers' needs. Failure to deliver the specified supply on time, every time, is a sure way to lose business.

  • Adoption of an individual animal ID and source verification system will help the U.S. remain competitive globally. It won't be easy, but it is certain.

  • Fed cattle marketed outside the spot/cash market could increase from the current 50% up to 80% by the next decade. Branded beef currently is estimated to be 20% of the market. By the next decade, that could be 60%.

    Today, most branded beef products carry national brands. In the future, supermarkets will want more products in the beef case to carry their private store labels.

  • Improved packaging technology will encourage supermarkets to offer more case-ready beef products, which currently account for about 30% of total units in the retail meat case. Case-ready processing, where nearly all the fat and bone is left on the packinghouse floor, will enhance the value of cattle with higher red meat yield.

  • Instrumentation capable of accurately assessing beef tenderness at line speed in the packinghouse will finally be developed. This will allow factors other than marbling to be used as indicators of tenderness, as the correlation between marbling and tenderness is not high.

    But, such technology won't diminish marbling's value, as it is highly correlated with juiciness and flavor. Today, the demand for well-marbled beef (mid-Choice and higher) accounts for 25-30% of the market, which likely won't change. The value of “guaranteed tender” USDA Select, however, will increase.

  • As intervention strategies improve, the incidence of disease outbreak and beef recalls due to bacterial pathogens, such as E. coli, Pasteurella, Campylobacter and Listeria, will decline. Consumers will grow even more confident about beef safety, but the industry can't afford to relax efforts in this area.

  • The current excitement over low-carbohydrate diets will eventually peak, and other fads will come into play. However, demand for beef will remain strong and not decline along with the low-carb fad.

    Regardless of trends, foods need to taste good or they won't have staying power in the marketplace. The good news: taste is beef's No. 1 attribute.

  • Specialty/niche food markets are growing exponentially. Once dismissed as a fad, the natural/organic market is growing at a 20% annual rate. Increasingly, producers will ally in partnerships, alliances and cooperatives to produce beef for these specialty markets.

  • Cow-calf producers can look forward to a few more years of profitability. Despite the positive margins, producers must continue to control their unit cost of production ($ cost/lb. calf).

  • The veterinary profession will serve increasingly as a source of information for cattlemen on numerous topics. Veterinarians will be prepared to provide valuable advice on genetics, nutrition, reproduction, marketing and other beef production areas.

  • Improved production efficiency throughout the beef value chain will help beef better compete with pork and poultry. Of all feed energy expended in producing beef, 70% goes solely to maintenance, and only 30% to productive processes such as growth and lactation.

    An astounding 50% of total feed energy is expended at the cow herd level. Animal scientists recently developed an expected progeny difference (EPD) for cow maintenance. It will enable producers to put selection pressure on the cost of maintenance.

  • Feedlot technology will result in continuing improvement in feed conversion. We know some cattle are genetically capable of converting at a ratio of 5 lbs. of feed to 1 lb. of gain or better. Increased coordination of industry segments will increase efficiency and reduce the cost of producing beef.

  • Recent research reveals early weaning (90-150 days of age) offers many advantages, particularly during drought. This alternative management strategy is likely to increase.

    In addition, several studies show early weaning, followed by a backgrounding phase that does not result in an unduly prolonged period of dietary restriction, can enhance eventual quality grade. Another study shows heifer calves early-weaned at 90 days reached puberty at a younger age and had a higher pregnancy rate than those weaned at 230 days.

  • Because traditional crossbreeding systems are cumbersome, especially in small herds and in intensive rotational grazing systems, more commercial producers will utilize heterosis by rotating unrelated F1 hybrid bulls composed of the same two breeds (A•B × A•B). This can result in a 12% increase in pounds of calf weaned per cow exposed over the average of the parental breeds.

    Rotating F1 bulls with only one breed in common (A•B × A•C) can result in a 16% increase. Because of the increasing demand for hybrids, more seedstock breeders will respond by offering more hybrid bulls to commercial customers.

  • Today, nearly everyone has equal access to outstanding beef genetics. Customer service will become the differentiating factor in the seedstock business. “Full-service genetic providers” will form the new generation of breeders. These breeders will be able to analyze customer production systems, determine the genetic package to best fit that need, and guarantee consistent production at an appropriate price.

  • The National Beef Cattle Evalua-tion Consortium will use genetic markers validated in the National Cattlemen's Beef Association's Carcass Merit Project to enhance accuracy of carcass EPDs. DNA tests for carcass traits also are being commercially developed. Expect a proliferation of similar diagnostic tests in the next few years.

  • Cloning holds great promise for genetic advancement. However, early embryonic mortality, late-term abortions and low calf-survival rates must be resolved before its use is widespread.

  • Food companies will face increased pressure to develop animal welfare plans as a way to assure consumers that food animals are humanely raised and handled.

Other important issues, which aren't covered in this article, include land use, the environment and government regulatory policies. These issues will continue to be a challenge for the industry just as they are currently.

Harlan Ritchie is a distinguished professor of animal science at Michigan State University in East Lansing.