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ARE THE PACKERS TO BLAME?

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Mike

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ARE THE PACKERS TO BLAME?

The feedlot industry is just now coming out of one of the worst marketing periods in history. If fed cattle levels were to reach $.70, most cattlemen would feel things were good. The reality is that cattle sold for $.70 in 1972. To be comparable in terms of real dollars (adjusted for inflation), cattle would have to sell for well over a dollar. The fact is that since the 1970s, the consumption of beef has fallen by nearly 30%, and the price of beef in real dollars has declined 40%. Faced with that scenario, any other industry would be making massive changes, .... but not us.

Why? Because most of us believe we know what the problem is. If you ask virtually any feedlot operator, you will get one of two answers: 1. either packer concentration or; 2. captive supply.

The reality is that this belief is not the result of an analysis, but a gut reaction. It is long-standing animosity, not detailed research, that has brought producers to these conclusions. Every credible study or packer concentration has concluded this is not the problem.
The Real Problem

The fact is that while packers, through contract cattle, could conceivably affect price on a short-term basis, the problem is much greater than that. The problem is long-term. It is and has been long-term because supply is not the problem. That is, to really understand the situation, one must understand the basic principles of economics - supply and demand. The first principle of economics is that price is affected by supply. As supply goes up, price comes down. But long-term, beef supply has gone down, ... and so has price.

Price has gone down because demand has gone down. That is, there are two factors that control price: How much we produce is one factor, but how intently the public wants to buy is another. The reality is that the public does not want to buy our product to the same extent as before. And that is something the packer doesn't have control over. Or do they?

In the 21 years I have been serving this industry, I have been reading research pertaining to what constitutes meat quality. And what that research says is that our grading system doesn't get the job done. In fact, it works against us. One of my favorite quotations is from a Canadian meat scientist, Dr. S.D. Morgan Jones: "The idea that the grading system works is a charade that plays out on a daily basis." Scientists from our own USDA have said, "Based on available data, it appears that between 5 and 10% of the variation in tenderness can be accounted for by USDA marbling degree. Most importantly, none of the studies (on USDA marbling score) detected palatability differences, ... that could justify the price differentials (between Select and Choice grades)."

The bottom line is that our grading system assumes that marbling is essentially the only determinant of quality. The reality is that marbling is only one of several aspects affecting quality (more later).

Our grading system also assumes that the relationship with marbling is linear. The reality is that it is curvilinear. In other words, once you reach a certain point with respect to marbling, there is diminishing value to further increases.

The reality, is that once there is enough marbling to reach the Select grade, further increases are of marginal value. At that point muscle texture becomes much more important - yet our system does not even consider muscle texture.
The Crux of the Problem

Our grading system was designed in 1916 and has essentially remained unchanged since that time. It is a crude system, originally designed to differentiate corn-fed Midwest steers from grass-fed Texas Longhorns. It assumes (but does not measure) that muscle texture will be similar to British breeds. The problem is that dozens of new breeds have been introduced since the inception of the grading system that have vastly different muscle texture.

The net result is that when a consumer buys a "Choice" steak, he or she has no idea whether it will be tender or tough. That steak could be from a super-tender, calf-fed Holstein with more than 300 days on feed, to a tough-as-nails roping steer that never saw the inside of a feedlot ‘till he was two years old.
Why Demand is Down

There are two primary reasons demand is down. One is the health issue, which to a certain extent our trade associations have tried to deal with. Although not relevant to this discussion, it is important to realize there is a lot more to this issue than meets the eye. Within the scientific literature there is a great deal of information that for some reason public health agencies have chosen to ignore. This is a major problem and it may take more than we are currently doing to correct it.

What is germane to this discussion is the other reason demand is down - inconsistency. This is a problem we know we have and it is something over which we have control, and yet there is enormous inertia with respect to doing anything about it. Why?

Several reasons. To begin with, most of us eat our own beef. We don't walk into a supermarket and pay $5.99/lb. For a T-bone, when (as discussed) unpredictably the steak might be tough. Several years ago I wrote an article entitled "Curse of the Quality Grade," which pointed out that tenderness is the primary item consumers think of in terms of quality, yet our grading system does not address tenderness in any objective manner.

Since that time, we have made a token gesture in the form of the B-maturity issue, but it has had no consequential effect. To begin with, depending upon the cut, research has shown 15 to 40% of all supermarket beef does not meet minimum tenderness standards. Yet a USDA audit showed only about 1.5% of all carcasses graded B.

The reality is that B maturity was a token gesture, because no one wanted to get into the real issue ... which is breeds. The facts are that there is much more variation between breeds than between A and B-maturity. The problem is that some of the breed associations are highly political and vocal. There are breeds that benefit by having an ineffective grading system and will do virtually anything to prevent improvement.

A client who is on the NCBA Grading Task Force asked a major packer about grading their own meat. The reply was that if forced to do so, they would simply continue to use the old USDA system. Given the fact that even USDA's own scientists criticize the ability of the current system to identify quality, why don't the packers want to change?

The reason is that the entire marketing system would change. As it is today, packers have evolved competing on procurement and packaging. Put them on a value-based system, and their world would be turned upside-down. Instead of selling #2 beef or #3 beef, they would have to genuinely identify quality. Most unnerving, they would essentially have to guarantee that quality to the customer.
How Much Would This Cost?

Nothing. As it is today, we assume that Choice is superior to Select and spend $20-$50 in extra feed to try to make every animal grade Choice. The reality, however, is that for any given animal, that extra feed does little more than generate excess fat that costs extra labor to trim off. For any given steer, the carcass with 100-120 days on feed will eat just as good as the same carcass with 130-150 days. Under a value-based system, cattle would be killed when they reach physiological maturity - in other words, with fewer days on feed. That saves money, ... all the way from the feedlot to the butcher. (Less money for unnecessary feed and less labor to trim off excess fat).
An Enormous Risk/Benefit

I recently was visiting with a couple of clients who thoroughly understand value-based marketing. Richard and Ron Heleniak own a highly successful regional packing facility and feed a large percentage of their own cattle. Ron said something that is totally obvious, but most of us probably haven't thought about it: "The big packers are not going to want to become involved in branded products due to the damage a recall could do. Conversely, this would be to the advantage of the industry as a whole. In other words, in case of an E. coli 0157:H7 recall, the public doesn't get turned-off on beef in general. If the packer's name appears on the package, they discriminate against that brand, ... not the product." Such would also be the case with quality. If a housewife gets a tough steak, she doesn't quit buying beef, ... she just switches to another brand.
The Future

If we want to change things for the better, we have to face reality. To reiterate, the reality is that our current grading system does not measure tenderness in any objective manner. As a result, it guarantees inconsistency, while causing us to feed excessively. Most important, it ignores the genetic diversity in cattle and keeps us locked into a commodity-based pricing system.

Every one of our competitors has gone to a value-based system. Ham, bacon, broilers, turkey, catfish, cheese and dairy products all have the quality guaranteed by the processor. This not only creates consistency, but also leads to innovation.

Every marketing study has indicated that the consumer is becoming less and less traditional. Vital to the future will be products that can be prepared quickly or are otherwise "user-friendly." Our competitor's products are available in a myriad of precooked, packaged and/or microwavable forms. Uncooked, they often come with instructions, breaded, basted or in their own cooking utensil. Turkeys even come with internal thermometers.

The packer achieves success not for accurately predicting quality or providing convenience. Rather, the packer is rewarded only through buying, processing and shipping at a lower cost.
Can We Blame The Packer?

No. As long as we continue to put blind faith in a system that ignores muscle texture and says marbling is the only indicator of quality, ... the packer has no choice. As long as we adhere to a system that says a crossbred Brahman with 150 days of feed is the same as an Angus with 100 days; is the same as a calf-fed Simmmental with 200 days, the packer has no choice. He has to buy them as cheap as he can, put them all in the same box, and worry not what the consumer thinks.
Bottom Line

The packer is not the cause of our problems, but he is the key to our future. By himself, however, he is not going to take us there. Left alone, he will continue to take us down the same road we are on. Declining real prices and market share.

Dr. David Porter Price,
"American Beef Cattleman"
 

HAY MAKER

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I believe some of what this man sez,but packers didnt get their reputation over nite they worked long and hard to be cussed by cattle men,and as long as people like BMR keep raising watusi's and long horns packers will keep buying em.and those of us that try to raise cattle that would grade are kept out because of packer games,we need the CAPTIVE SUPPLY REFORM ACT,then I will think about selling on the grid,course when that happens the packer will have another angle,so to answer your question "is the packer to blame?"I say yes he is and always will be *^@#$&&$$&*%#%^&&packers...............good luck
 

agman

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This is an excellent article that explores additional factors that impact beef demand. His comments are consistent with information learned from the NCBA sponsored Beef Quality Audit.

The author is wrong in one statement that "beef supply declined". That is incorrect, beef supply has been in a general upward trend interrupted only by brief periods of declining production when herd expansion was underway as it is now.

The more one learns about all the factors that impact the market the less one is inclined to point the fingers at any one segment.
 

Mike

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reader (the Second) said:
My husband used to complain that Americans traded tenderness for taste. Obviously a tough steak is not pleasant but a chewy, tasty steak is great -- which is how good quality Argentine beef is.

As a consumer who is willing to pay for quality, I would be pleased if I had a way to buy high quality steaks in the chain supermarket (which I don't). A campaign that taught consumers about different grades and breeds would be well accepted I think.

However remember that the young people in the suburbs and cities with money to pay for higher quality beef are looking for smaller portions in their steaks.

I would be willing to bet a good quality U.S. or Canadian steak is great also. In fact, I KNOW it is. Problem is, the processing from the kill floor to the plate is just as important as the breed and it matters little what country it comes from. I would dare to say that if your first "Argentine" beef eating experience had been unsatisfactory your views would not be as high as they are. We only get one chance to make a first impression, and it usually lasts.

I have a hard time understanding the "smaller portion" discussion.
Just cut them in half! When I grill a porterhouse or T-bone for the wife and myself, I cook 1 steak. She gets the filet, I get the strip, and the dog gets the bone.
One day if you're ever in Alabama you need to stop by for a visit and let me treat you to a "homegrown steak" that will make your tongue slap your brains out. Then you will understand how important aging/handling is to the process. My butcher makes hamburger that is as popular around here as steak, the trick is in the amount - and kind of fat added.
 

Sandhusker

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Don't forget aging. They taught us at dear 'ol Nebraska U that aging was the single most important operation that adds value to the critter postmortem. I always have mine hung for 21 days. I'd like to know how long the big packers age their beef before it gets sent to the store. I'm betting it isn't very long.
 

agman

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reader (the Second) said:
My husband used to complain that Americans traded tenderness for taste. Obviously a tough steak is not pleasant but a chewy, tasty steak is great -- which is how good quality Argentine beef is.

As a consumer who is willing to pay for quality, I would be pleased if I had a way to buy high quality steaks in the chain supermarket (which I don't). A campaign that taught consumers about different grades and breeds would be well accepted I think.

However remember that the young people in the suburbs and cities with money to pay for higher quality beef are looking for smaller portions in their steaks.

I have eaten beef from Argentina on numerous occasions out of courtesy. My personal view is that it is not even close of good U.S corn fed beef.

There is alot of excellent U.S. beef. The problem is it is too expensive for most retail shoppers so what you get offered in most retail outlets is select. I personally am not a fan of select beef and I have heard all the sales pitches. I want a great eating experience everytime, not one-half of the time. The top third of choice or better is all I am interested in. I am forever grateful, and so are my many friends, that I always have access to such product.
 

Mike

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Sandhusker said:
Don't forget aging. They taught us at dear 'ol Nebraska U that aging was the single most important operation that adds value to the critter postmortem. I always have mine hung for 21 days. I'd like to know how long the big packers age their beef before it gets sent to the store. I'm betting it isn't very long.

I have heard some at 3 days, some at 5. I don't go by the number of days because of temperature variations in the cooler. I watch the tenderloin really close and when a few "green hairs" pop out on it - it's time to cut and wrap.
Future beef was "hot aging" (I think) for 48 hours.

I bought a whole tenderloin for a "memorial day" gathering that was in a cryovac package. It had on the outside "serve by July 1st. That would mean more than a month from time of kill to serving.
 

Jason

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I also agree that the article posted has some good ideas, but again there are some limiting factors that the author is not aware of.

Saying a Texas Longhorn roping steer fed long enough would be rewarded as a choice carcass is wrong, the age would place it as B maturity number 1. Then it would have to even marble enough to reach choice, not likely as many studies have found cattle need poarticular care in the early stages of life to grade better.

The difference between breeds is a truth most don't like to discuss. When I can sell a beef to a neighbor that has always killed one of his own and he says the one he bought from me is the best he has ever had tells me a lot.

Aging, while it helps the tougher carcasses, only leads to excess trim in a properly finished carcass. Mine are hung 8-10 days.

I also have found taste and texture are important to my customers. Most of my carcasses are virgin bulls so they are leaner than steers or heifers, but also have a better flavor. many customers are afraid of them when they hear bull ( they think stag) but a free test steak usually results in a sale.

As Agman pointed out, most consumers don't get to buy the better beef at the supermarket, at least at their choicen price. Those who have found a branded beef program that suits their tastes usually results in them buying more beef than before. The key is making it as affordable as possible, and not dumping the price if it is in short supply.

Increasing the supply of high demand beef and tweaking the operations between live and packaged will have a positive impact on eating experiences.

Things like Vitamin E, low stress handling, even getting ground beef frozen sooner assists the flavor, or having it hit the beef counter qiucker saves it from picking up a taste from the containers it is shipped in.

Ranchers putting their ground directly into freezer bags and into the freezers is one of the main reasons people will prefer the ranch direct ground over store bought almost every time.
 

Sandhusker

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Jason, "I also have found taste and texture are important to my customers. Most of my carcasses are virgin bulls so they are leaner than steers or heifers, but also have a better flavor. many customers are afraid of them when they hear bull ( they think stag) but a free test steak usually results in a sale."

I'll vouch for that. A couple of years ago, my dad asked me if I wanted to go in halves on a beef. I said sure, expecing the usual Angus x Maine steer. When I picked up the meat, I saw in the book that it was a Limo bull and wondered what I had gotten myself into. It turned out to be excellent beef and I'd certainly do the same deal again. I had some friends from Omaha up and I served them T-bones, they could't believe the size of them and called them "Fred Flintstone" steaks - and after eating them proclaimed them the best they had ever had and wanted me to part with my supply in the freezer.
 

agman

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Sandhusker said:
Don't forget aging. They taught us at dear 'ol Nebraska U that aging was the single most important operation that adds value to the critter postmortem. I always have mine hung for 21 days. I'd like to know how long the big packers age their beef before it gets sent to the store. I'm betting it isn't very long.


Retailers demand beef with current production dates for coloration and shrinkage purposes. Also, how feasible and costly would it be to age all carcasses for 21 days? The shrink alone would make it uneconomic on a large scale.

Increasingly the wet-aging process is being used which controls shrink much better than dry-aging. Personally, I prefer wet-aged product for taste. Soapweed may wish to comment on a whole wet-aged rib-eye that mysteriously showed up in his refrigerator last fall.

Our family just had a reunion and consumed a whole case of wet-aged rib eye steaks. The only utensils used were a plastic knife and fork. Now that is tender- they literally melted in your mouth.
 

Sandhusker

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Agman, "Retailers demand beef with current production dates for coloration and shrinkage purposes. Also, how feasible and costly would it be to age all carcasses for 21 days? The shrink alone would make it uneconomic on a large scale."

I agree it would add expense. Yet, if you're serious about putting the best product you can in front of the customer.....
 

agman

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Sandhusker said:
Agman, "Retailers demand beef with current production dates for coloration and shrinkage purposes. Also, how feasible and costly would it be to age all carcasses for 21 days? The shrink alone would make it uneconomic on a large scale."

I agree it would add expense. Yet, if you're serious about putting the best product you can in front of the customer.....

Prime is the best beef for an eating experience you can provide a customer. The problem is that only about 3% of the population can afford that product. If we do as you imply, age all product, how many customers will be priced out of the market by the added cost?
 

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