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Articles from 2005 In December


Nine Challenges Facing The Industry In 2006

  • Exports -- rebuild and regain our market share in lost export markets, while reducing market barriers and solidifying the U.S. position as the world's foremost supplier of high-quality, safe and wholesome, corn-fed beef.
  • Continue to shift away from the commodity trap, and create marketing systems and avenues that allow us not only to consistently hit specific market segments and niches, but reflect these value differences through a revamped marketing system.
  • Implementation of a national animal ID system.
  • Be ready to face even more ferocious attacks from anti-beef advocates.
  • Coping with a cattle-cycle phase where more beef tonnage will be available (even with exports and dry conditions offsetting the effects of expansion to a large extent).
  • Fierce competition from competing meats.
  • Higher fuel, transportation, energy and input costs.
There are two challenges, however, that overshadow all others and will be the keys to determining if the industry experiences a 2006 as prosperous as 2005. The industry seemingly has a clear vision and plan in place to expand on its success in the areas of demand and the business environment in which we operate, but we must watch these two key areas:
  • The first key will be achieving industry unity and mobilizing the industry to move aggressively forward. This isn't the type of unity that eliminates disagreement but that embraces democratic methods of policy formation. It's a unity that allows producers to set aside minor differences on issues to focus on a larger vision and common purpose on which all producers can agree.
  • The second key is to eliminate the zero-sum mentality that's crept into our industry. There's nothing more absurd than the zero-sum view of the world. It leads to the belief everyone must share the same view and operate under the same system, and that government is the tool to enforce that system.
How many of you produce a better product, have a more healthy resource base, enjoy a higher standard of living, and operate more efficiently than your grandfather did? We're producing a higher quality, more differentiated product, more efficiently than 20 years ago. We have better and more powerful genetic and animal health tools, better equipment and technology. It's a combination that gives us the tools to be stronger and better competitors.

Yet, people say we can't compete globally. They say concentration, corporate feeding, multi-national packers, Wal-Mart, pork and poultry, Brazil and Australia will undo us.

We don't operate in a zero-sum world. The size of the pie isn't stagnant or, at least, it certainly doesn't have to be. Our responsibility lies in building a better future just as those who preceded us did.

As long as the majority continue to strike forward, those who advocate the demise of independence, freedom and free markets, and a shift away from entrepreneurship to government management, will always be held at bay. The fundamentals for the future of the beef industry are strong. If we embrace the future with a progressive and aggressive attitude focused on making the pie bigger, we can make it great.

A focus on protection, on stagnation, and the belief that in order for one to benefit another must sacrifice, is our only truly insurmountable obstacle.

Drought Deepens In Texas

Even as national herd expansion continues, producers in Texas and some other parts of the nation are being forced to liquidate as dry conditions worsen.

Large runs of cattle have been reported at auction barns in dry areas of Texas, which means a lot of culling decisions have been made and there are a lot of weaned calves moving, says David Anderson, Texas Cooperative Extension Service livestock marketing economist. In eastern Oklahoma, ranchers are hauling water and some areas of the Corn Belt also are parched, he says.

In fact, according to the National Drought Monitor, most of Texas is abnormally dry, and a fair portion of the state -- primarily a wide band from South Texas to North Texas -- is immersed in drought conditions ranging from severe to extreme. Extreme drought conditions also prevail in southeast Oklahoma, southwest Arkansas, and parts of Illinois and Indiana.

"Has this drought contributed to bringing prices down somewhat? In some instances, it has," Anderson says. "We had a big corn crop that created a large level of stocks, but the big risk for corn is the coming year. Those stocks will disappear really quickly if this dry weather continues. What's really a concern is we don't have soil-moisture levels built up when we begin to think about spring planting. That, I think, is creating some uncertainty in the market, particularly for feeder cattle."

Though Anderson predicts lower but still historically high cattle prices next year, he cautions, "We've got higher production costs with the price of fuel and fertilizer. I think we'll see a lot less fertilizer on pasture next year, which will affect hay production and all of the segments associated with that... It's certainly taking a bite out of people's disposable income. There may be some consumers out there even switching to some lower price cuts to offset the decline in disposable income because of these high fuel prices."

Go to www.drought.unl.edu/dm/monitor.html to view the nations' drought map.

Japan Reopens; First Product On The Way

U.S. beef products will be back in Japan by the time you read this. That reality occurs just a week or so shy of the two-year anniversary of their banning due to the discovery of BSE in a Washington state dairy cow.

On Monay, Japan announced all systems go for resumption of North American beef imports that meet requirements agreed to by the countries more than a year before. The agreement restricts these imports to beef and selected products of animals verified to be 20 months of age and younger.

The Japanese government's decision came on the heels of a final report by a Japan Food Safety Commission issued late last week. The government-appointed panel ruled that differences in BSE risk between North American and Japanese beef would be "very small" if the import conditions were observed.

On Monday, U.S. Meat Export Federation (USMEF) president and CEO Phil Seng told reporters the first shipment of U.S. beef would arrive in Tokyo's Narita Airport on Dec. 17. Among the products from various U.S. suppliers included in that parcel, according to the Lincoln Journal Star, will be Nebraska beef.

USMEF's announcement was upstaged just a few hours later, however, when Harris Ranch Beef announced that a final surveillance audit completed that day by USDA had cleared the way for the Selma, CA-based processor to export product to Japan. The first shipment was to head out Wednesday.

Japan becomes the 67th country to reopen to at least limited trade in U.S. beef, but Japan is a very important cog.

Gregg Doud, National Cattlemen's Beef Association economist, says foreign market trade for U.S. beef was worth about $15/cwt. to the fed market before the 2003 closure. Without Japan, the U.S. had recovered about a third of that, or $5/cwt. The Japanese market represent half of the remaining $10, he says. Other important markets yet to open, but on the cusp, include Taiwan, South Korea, Singapore and Hong Kong.

In a flurry of Monday morning press conferences, speakers expressed their eagerness to win back the market-share levels seen prior to discovery of BSE in the U.S. For the U.S., Japan represented its top export market in 2003, at $1.4 billion in sales. For Canada, Japan was its third-largest beef-export destination, with more than $81 million worth of beef going to Japan in 2002.

But regaining market share that has gone primarily to Australia, will take some time, everyone agrees. For one thing, the Japan market is opening with product limitations that didn't exist before the ban.

For another, it will take some time to build age-verified supplies in the U.S. USDA says 30-35% of the U.S. cattle supply currently would fit the age-verified requirement. USMEF, however, says indications from its members would put that percentage at more like 10-15%

And, recent polling data in Japan has indicated a high percentage of Japanese consumers claiming they won't buy U.S. beef once it becomes available. Time will tell on that front, but many analysts expect that resolve to dissolve fairly quickly.

To help that along, Seng says USMEF is planning a media and promotional blitz in Japan to build consumer confidence and win back consumers.

In other big news this past weekend, USDA's Animal and Plant Health Inspection Service announced its intention to amend regulations to re-establish, under certain conditions, the importation of whole cuts of boneless beef from Japan. Japanese beef exports have been banned in the U.S. since BSE was first discovered in Japan in the fall of 2001 (see next news item).

Interestingly, and in keeping with all the weird coincidental twists this BSE trade saga has taken the past two years, Japan Today reported confirmation over the past weekend of Japan's 21st case of BSE. The Hokkaido Prefecture cow died the previous week.

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