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Contact: Burt Rutherford                                                                                                        Nov. 9, 1999

MEETING THE CHALLENGE
WILL REQUIRE CHANGE FOR CATTLE FEEDERS

There's a saying in the wine industry that cuts to the basics in very short order-you can't make good wine unless you have good grapes.

Translating that to the beef industry, Dr. Keith Belk with Colorado State University told cattle feeders that identifying the "good grapes" in the U.S. cattle herd will help cattlemen hit selected, specific targets--one of the many challenges cattlemen have if they're serious about being a consumer-driven industry. Belk, speaking at the "Exploring New Horizons" Convention of the Texas Cattle Feeders Association (TCFA) today in San Antonio, laid out his thoughts on the challenges and opportunities facing the cattle industry.

Belk told cattle feeders that regardless of what producers decide is necessary to remain competitive, it must be done quickly. "The demand decline clock is ticking, the market share fuse is burning," he said. To see what that means for cattlemen, you have only to look at the past several decades. "Cattle-Fax reported in February that from 1980 to 1998, market-share spending for beef decreased almost 14% and almost all of the loss was attributable to increases in market share spending for chicken." Putting that in cattle terms, Belk said that means cattle feeders now receive about $250 less for every steer or heifer they sell.

In order to regain that lost market share, cattlemen need to continue moving quickly toward a marketing environment that allows them to assure consumers that all of the beef they produce-both fresh and ready-to-eat-is safe, healthful, high quality, consistently palatable and produced without compromising the environment or the animal's welfare.

Cattlemen think they do that already. Consumers aren't so sure. So if cattlemen genuinely want to become more consumer driven, adopting and then living by the standards set out in various beef quality assurance programs will become essential, Belk said.

"Several pork packers announced in late 1998 that they will buy hogs for slaughter only from swine producers who qualify for NPPC's most stringent on-farm pork safety standards," he told cattle feeders. "It seems highly probably that similar things will happen in the U.S. beef industry."

The move toward selling cattle in some form of an alliance will speed that trend, he added. "Harlan Ritchey with Michigan State University reported that a group of agricultural economists concluded at a 1998 NCBA strategy conference that 60 alliances will form in the next five years. Four to 11 of those will control the U.S. supermarket meatcase." And, he said, once an alliance gets a foothold, it will be able to dictate animal husbandry practices as well as quality, consistency and safety.

In addition, Belk said the report indicated that by 2010, the 30 largest cattle feeders will generate 50% of all finished cattle. "They will align with cow-calf producers, packers, retailers and food service operators to produce branded, source-verified beef. Those producers who resist this paradigm shift will fall further and further behind until they have no market at all."

Belk said it seems likely that much of the retail beef in the future will be produced by partnerships and alliances and that the beef will be verified as to its source, the production practices used and how it was processed. And it will be branded. "One of the really great benefits of a beef industry based on source-verification and branded beef is that with such change will come value-based marketing."

Belk asked cattle feeders to do a little imaginative thinking. "Just imagine a beef industry in which the targets are agreed upon in the beginning and based upon what customers want and what consumers will purchase, eat and enjoy. Just imagine a beef industry in which you are paid for producing cattle that hit the targets and discouraged, economically, if you produce cattle that do not. Just imagine."

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