Beef producers may need to make operational adjustments
By Jennifer Bremer
Beef producers must meet the specifications that are sought after by the consumers in order to stay competitive and profitable in the future.
John Lawrence, director of the Iowa Beef Center told attendees to the 4-State Beef Conference it is important to increase the number of high quality beef that is raised, while decreasing the number of yield grades 4 and 5.
"Demand for beef has decreased over the past three years and there has also been a decrease in the percentage of cattle that are grading Choice," said Lawrence. "At the same time there is an increase in the number of cattle that are grading Select."
He said the consumer has told the industry that they want a leaner product; therefore the producers need to work on increasing the quality grade but also decreasing the yield grade.
"The Choice-Select spread was $4 in the 1990s. Now that spread is $10 and has been as much as $20, therefore it is even more important to narrow that gap in quality," he said.
The premiums are still seen for high quality beef carcasses, especially those that qualify for certain brands such as Certified Angus Beef.
Lawrence said grading has always been a difficult issue for packers because it takes time for the grading to be done. The U.S. Department of Agriculture has started implementing the use of instrumental grading, which would speed up the lines while keeping the accuracy up.
For the past two to three years instrumental grading has been allowed for yield grading and recently it has been approved for quality grading.
"By adding two graders to a line and improving the use of instrumental grading, money will be saved, while grading accuracy is improved," he said.
Beef exports affecting prices
Beef exports are also an issue when it comes to beef demand. The Japanese and South Korean markets will be slow to rebuild. Japan demands age verification and South Korea requires boneless beef that is 30 months or younger in age.
"The South Korean market is difficult to define, since they have already refused our beef because of a tiny piece of cartilage that was found in the shipment," said Lawrence.
Domestically the beef demand has been affected by the consumer adjusting to higher energy prices, a decline in poultry supplies and an increase in pork supplies.
The country-of-origin labeling (COOL) and animal identification programs have lead to some information indecision for beef producers, according to Lawrence.
"It looks like USDA has some indecision too because COOL has gone from voluntary to mandatory and animal ID has gone from mandatory to voluntary, so it will be interesting to see if the Democratic control in Congress will affect this at all," he explained.
Lawrence told producers it has become even more important for them to know what they have and document it.
"We have a changing world with a multitude of label claims, increasing consumer demands, increasing customer expectations and price differences," he said. "Beef producers must be willing to go the extra mile to compete in this world."
The agriculture industry has always had a high level of trust, but he said even agriculture is moving toward a "if you can't prove it, it didn't happen" approach.
Producers are seeing a greater differentiation in cattle and price based on what information they are willing and able to generate for the buyers of their feeder cattle.
The current trend has been to have cattle enrolled in certified or verified programs in order to determine that they have been fed and cared for properly.
"There are also studies that show that healthy cattle not only gain better, but they also grade better and in order to have better quality beef, we need to have healthier cattle," Lawrence added.
He said buyers are also willing to pay a premium for cattle if the vaccination information comes from a third party such as a veterinarian.
Age verification can also qualify cattle for the Japanese market. This is achieved through being involved in a quality management system through an independent company or packer. These programs are used to prove genetics and/or age.
Ethanol impacts beef industry
Ethanol has had a big impact on the beef industry as well, not all positive.
"Ethanol has led to higher corn prices, higher land prices and lower calf prices. Because the ethanol industry continues to grow, more corn will be produced," said Lawrence. "We need 129 percent of the 2006 corn crop to be able to supply the current ethanol plants and that doesn't include the 30 percent more needed for other uses."
Ethanol has provided an economical feedstuff--in distiller's grains, but he is also concerned with the amount of distiller's grains that will be produced at these plants.
Projections are that by the year 2012, less than half the amount of distiller's grains produced will be utilized in feed for beef cattle, dairy cattle and hogs.
Lawrence warned that producers must know how to feed the distiller's grains and feed it in a balanced ration.
Recent reports have shown there are a record number of cattle on feed, and that in combination with weaker demands has lead to lower prices for cattle. Lawrence said those prices have been down as much as $20 since the year's end.
He said beef producers are going to have to make adjustments to their operations in order to offset higher feed prices, a low demand and the downward price slide that is expected through 2013.
The 4-State Beef Conference is an annual event designed to give beef producers in Iowa, Kansas, Missouri, and Nebraska a regular update on current cow-calf and stocker topics. The conference provides a forum of specialists from four of the country's leading beef cattle land grant universities. The program is then presented at a site in each of the four states over a two-day period.
The 2007 conference was held on Jan. 10 and 11 at Holton, Kan.; Tecumseh, Neb.; Lewis, Iowa; and Bethany, Mo.
By Jennifer Bremer
Beef producers must meet the specifications that are sought after by the consumers in order to stay competitive and profitable in the future.
John Lawrence, director of the Iowa Beef Center told attendees to the 4-State Beef Conference it is important to increase the number of high quality beef that is raised, while decreasing the number of yield grades 4 and 5.
"Demand for beef has decreased over the past three years and there has also been a decrease in the percentage of cattle that are grading Choice," said Lawrence. "At the same time there is an increase in the number of cattle that are grading Select."
He said the consumer has told the industry that they want a leaner product; therefore the producers need to work on increasing the quality grade but also decreasing the yield grade.
"The Choice-Select spread was $4 in the 1990s. Now that spread is $10 and has been as much as $20, therefore it is even more important to narrow that gap in quality," he said.
The premiums are still seen for high quality beef carcasses, especially those that qualify for certain brands such as Certified Angus Beef.
Lawrence said grading has always been a difficult issue for packers because it takes time for the grading to be done. The U.S. Department of Agriculture has started implementing the use of instrumental grading, which would speed up the lines while keeping the accuracy up.
For the past two to three years instrumental grading has been allowed for yield grading and recently it has been approved for quality grading.
"By adding two graders to a line and improving the use of instrumental grading, money will be saved, while grading accuracy is improved," he said.
Beef exports affecting prices
Beef exports are also an issue when it comes to beef demand. The Japanese and South Korean markets will be slow to rebuild. Japan demands age verification and South Korea requires boneless beef that is 30 months or younger in age.
"The South Korean market is difficult to define, since they have already refused our beef because of a tiny piece of cartilage that was found in the shipment," said Lawrence.
Domestically the beef demand has been affected by the consumer adjusting to higher energy prices, a decline in poultry supplies and an increase in pork supplies.
The country-of-origin labeling (COOL) and animal identification programs have lead to some information indecision for beef producers, according to Lawrence.
"It looks like USDA has some indecision too because COOL has gone from voluntary to mandatory and animal ID has gone from mandatory to voluntary, so it will be interesting to see if the Democratic control in Congress will affect this at all," he explained.
Lawrence told producers it has become even more important for them to know what they have and document it.
"We have a changing world with a multitude of label claims, increasing consumer demands, increasing customer expectations and price differences," he said. "Beef producers must be willing to go the extra mile to compete in this world."
The agriculture industry has always had a high level of trust, but he said even agriculture is moving toward a "if you can't prove it, it didn't happen" approach.
Producers are seeing a greater differentiation in cattle and price based on what information they are willing and able to generate for the buyers of their feeder cattle.
The current trend has been to have cattle enrolled in certified or verified programs in order to determine that they have been fed and cared for properly.
"There are also studies that show that healthy cattle not only gain better, but they also grade better and in order to have better quality beef, we need to have healthier cattle," Lawrence added.
He said buyers are also willing to pay a premium for cattle if the vaccination information comes from a third party such as a veterinarian.
Age verification can also qualify cattle for the Japanese market. This is achieved through being involved in a quality management system through an independent company or packer. These programs are used to prove genetics and/or age.
Ethanol impacts beef industry
Ethanol has had a big impact on the beef industry as well, not all positive.
"Ethanol has led to higher corn prices, higher land prices and lower calf prices. Because the ethanol industry continues to grow, more corn will be produced," said Lawrence. "We need 129 percent of the 2006 corn crop to be able to supply the current ethanol plants and that doesn't include the 30 percent more needed for other uses."
Ethanol has provided an economical feedstuff--in distiller's grains, but he is also concerned with the amount of distiller's grains that will be produced at these plants.
Projections are that by the year 2012, less than half the amount of distiller's grains produced will be utilized in feed for beef cattle, dairy cattle and hogs.
Lawrence warned that producers must know how to feed the distiller's grains and feed it in a balanced ration.
Recent reports have shown there are a record number of cattle on feed, and that in combination with weaker demands has lead to lower prices for cattle. Lawrence said those prices have been down as much as $20 since the year's end.
He said beef producers are going to have to make adjustments to their operations in order to offset higher feed prices, a low demand and the downward price slide that is expected through 2013.
The 4-State Beef Conference is an annual event designed to give beef producers in Iowa, Kansas, Missouri, and Nebraska a regular update on current cow-calf and stocker topics. The conference provides a forum of specialists from four of the country's leading beef cattle land grant universities. The program is then presented at a site in each of the four states over a two-day period.
The 2007 conference was held on Jan. 10 and 11 at Holton, Kan.; Tecumseh, Neb.; Lewis, Iowa; and Bethany, Mo.