If you want to win a national football title, it seems more rational to focus on going undefeated than merely posting a winning record. Aim for the top and you might still get there, even if there are some dropped balls along the way. Aim for the middle and you're assured victory at least half of the time, but never the victor's spoils.
That's why the new industry long-range plan unveiled last month is so exciting. To say it's ambitious is akin to saying monkeys like bananas. Among the shortlist of lofty targets: increase consumer demand for beef by 10% within the next four years!
Demand defines potential
Swelling beef demand has been the catalyst of the industry's newfound fortunes. Yes, supply-side fundamentals and extraordinary climatic and global animal disease events have magnified the effect, but demand has been the driver.
In fact, the 25% increase in consumer beef demand enjoyed by the industry today — compared to 1998 when the 20-year demand slide for beef was reversed — has meant an additional $22/cwt. to the price of fed cattle, Cattle-Fax reports. On a 12-weight steer, that's $264/head.
Without this increased demand, fed steers, expected to average $86.50/cwt. in 2005, would have been bringing about $64.50/cwt. In other words, the industry's new pricing plateau has been achieved on the shoulders of consumer demand.
Judging by the historically high feeder and calf prices, along with historically wide price spreads between feeder and fed cattle value, cow-calf producers would be hard-pressed to argue they haven't also benefited from increased demand.
Such steamy progress — consumer demand jumped 7.74% from 2003 to 2004 alone — would have made it easy for the industry visionaries drafting the long-range plan to just focus on retaining the gain. But, even if the gains were only maintained, input costs increasing with inflation would take some bloom off the rose on a net basis.
Instead, establishing such a bold target means the industry is serious about making cattle ownership profitable enough to bring kids back to the family business, as well as attract new investors.
Other key targets include growing beef's share of the U.S. protein market to 32%, and increasing U.S. beef exports 400% from 2005, to 2.5 billion lbs. All of this by 2010.
Incidentally, the National Cattlemen's Beef Association (NCBA) and the Cattlemen's Beef Board assembled the group to draft the plan. NCBA members will consider the final plan, following public input, at that organization's annual meeting next month. It matters not whether you personally support either group behind the long-range plan. If the industry gets behind it, everyone has a chance to win.
Grow the pie — grow the slice
There are many ways to illustrate the economic impact of a 10% increase in beef demand. In simple terms, figure consumer spending on beef in 2004 was about $70 billion. Just 10% more would be another $7 billion to be shared within the industry.
Play the same game and add 10% to the average price of five-weight calves Cattle-Fax expects for last year, and you'd be talking $139/cwt. vs. $127/cwt.
Obviously, such primitive accounting fails to account for such critical variables as more herd expansion, which would occur in response to added profit potential. However you figure it, though, it's a trip worth taking, especially when the price to ride is essentially the same.
How achievable is the goal? To be sure, there are plenty of obstacles. International beef trade, for instance, is still up in the air; no one knows how quickly export demand can be recovered.
Unforseen circumstances could stymie attainment of the goal within the specified period of time. Avian influenza, for example, could change all meats' pricing structure, and a human flu pandemic could cast a long shadow over the overall economy.
But by shooting for the equivalent of an undefeated season, the industry could come up short of the ultimate line and still earn a champion's paycheck.
Plus, it's not like the industry hasn't already demonstrated its ability to do the unthinkable. In the last long-range plan (established in 2000) the industry set out to increase demand by 6% by 2004. Plenty of folks thought that was nuts, but it was accomplished in spades.
Increase already strong consumer demand by 10%? Argue for possibilities rather than limitations? That's news worth investing in.
See the draft plan at http://longrangeplan.beef.org.