Ivan Rush: The Beef Industry and what’s important in selling steaks
February 17, 2012
I know quite a few ranchers that have started calving Fortunately, the weather has been very favorable for calving which helps make it more manageable and less stressful. No matter when producers calve, it increases the work load but it is the most exciting and rewarding time of the year.
It seems that this time of year many speakers are at cattle meetings emphasizing the importance of colostrum getting to the newborn. I am not sure I can add much more to what cattlemen already know – the sooner we can get high quality colostrum milk from the dam into the calf the better immunity the calf will have down the road. If this is not high on your list I would encourage everyone to consider placing it there.
What about these higher cattle and beef prices? To some this is frightening, while others see it as something to celebrate, but at least most will agree – it is interesting and equals as a conversation starter. Questions constantly are asked, “How much higher can they go?” “When will consumers say enough is enough?” I certainly don’t have the answer to these questions, but have felt that producers should prepare for when they decrease.
I find the issue of the shrinking cow herd and its impact on the industry and current prices, troubling and intriguing. Some have concerns on the shrinking industry and I share that concern, because if a packer closes its doors it will be much more difficult to get it re-opened or a new plant constructed. Especially in today’s environment of so called “outspoken environmentalist.” The same is true for a large feedlot and some cow-calf operations. I understand as we shrink the industry, fewer cattle numbers become more efficient, that then results in fewer people needed in the industry, that’s a large concern.
On the other hand I can recall in the early seventies when the University of Nebraska (UNL), launched a livestock development program in Nebraska in a time when calf prices were high and cow-calf producers were profitable. Things looked great. Many spoke of the expanding global population and the demand for more beef. Promoters felt that Nebraska should have a larger investment in the cattle industry. As a result of high calf prices and profit for ranchers, which seemed forever, the industry increased cow numbers and more calves were in fact produced. At that time the cattle cycle was more prominent and as numbers increased calf prices dropped and ranchers encountered losses.
The actual impact of the UNL Livestock Development program had on total calf numbers across the U.S., was questionable. However, I can recall the program was severely criticized by some leading Nebraska cow-calf producers. “Look at what that program did to our calf prices,” was often heard.
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When I see some groups and writers advocate that we should increase calf numbers and even though I understand why, I must ask that if calf prices fall who and what will be to blame? No, I am not chicken little and no, I don’t think that the sky is falling, as all indicators look good for the next several years. I am old enough however to feel that the sky is not the limit, and as a consequence feel the industry is in a spot where caution should be exercised as we look to expand. In the event, we do increase calf numbers and ultimately beef output it is critical that we continue to do everything we can to increase the demand for beef even at higher prices.
Some have stated that the dollar advantage of source and age cattle may decrease or perhaps go away if Japan increases its maximum age to 30 months for imported cattle from the U.S. In thinking of the importance of source and age programs I find the research that Dr. Chris Calkins, UNL meats specialist, and his colleagues conducted on consumers buying habits, when ordering steaks in high end steak houses very interesting. This research looked at consumers on the east coast and Phoenix, AZ. There research looked at what influenced consumers decisions as selected the steaks they ordered. Before consumers came to the restaurant they were sent a questionnaire asking them many questions on what influenced their decision when ordering a meal at a restaurant. I should point out that those consumers were “beef eaters” as they consumed beef at least three times per week. In early survey work they ranked the: specific cut, price, tenderness verification and quality grade as the top four criteria in ordering steak on the menu. Interestingly they ranked U.S. origin, traceability to the farm or ranch, corn or grass fed and brand as very little importance. However, the research went on and brought about 200 of the consumers that answered the survey to a “steak house” restaurant and offered them a choice of 4 different steaks, priced at different points and learned in fact how they made their purchase with their own money. The four steaks were labeled by their source of origin.
The researchers found that when the participants actually ordered their steaks they were willing to pay about $5 more for their steak if they knew the state it came from and $8.50 more if they knew the farm or ranch it came from but interestingly the region (Midwest) was of no importance to them and actually paid $5 less than for generic “Classic” steak.
I feel the bottom line of this research is that even though when at home filling out the survey, brands of steaks seemed of low importance but when given a chance to “vote” with their money the source of farm, ranch or state was important and they were willing to pay $5-8.50 more per steak. This gives me confidence if source and age verification is not important to the export market as it has been in the past, it may gain in importance in the domestic market at least with high-end steak houses and nitch markets.
I also find it interesting to ask if some production practices are important. Will it be brought about through regulation or consumer demand. I worry about the government mandates, as some groups advocates. Hope all goes well with calving.