Beef: Why ‘Trade Down?’

Demand for beef is down.

Demand for beef is down. Can you blame the recession? Not entirely, but it’s a darned inconvenient coincidence.

It’s hard to argue that beef quality was too low, because production of every class of premium beef has been trending up for some time.

The supply of Choice beef in particular has increased for six years, and at an increasing rate, especially in the last two years. In concert with that, supplies of Select beef declined in quantity and total value.

Beef industry observers don’t understand why beef quality turned sharply higher in 2008, and because the greater supply was unexpected, our multi-billion-dollar industry could not adjust quickly enough in the short run.

With a huge share of business locked up in contracts that reflect expectations, it takes many months for the rudder to deploy, let alone turn the ship. Those reactions were slowed by economic panic, especially in the foodservice sector.

They were also muffled by deployment of other rudders.

For more than a decade, the beef industry has worked to add value to the previously underutilized chuck, the front portion of every carcass. First came the teres major and flat iron steaks; as their popularity grew, the industry followed with another round of discoveries such as the Denver steak, ranch steak and country-style ribs. More packing plants and processors began to break down the chuck to supply this demand.

As restaurateurs saw options beyond the middle meats, those strips, rib-eyes and filet mignons, chefs who never bought anything from the chuck started buying a lot of the new “value cuts,” especially in premium Choice and Prime, with their inherent safety net of superior marbling.

This strategy has been a key to the upper tiers of beef quality maintaining stronger demand. A rancher might check the Choice-Select spread to monitor demand for quality, but that number — lately quite small — does not reflect the stronger demand for higher quality, most of which has been sorted off to premium brand markets.

To read the entire article, link to Delta Farm Press.