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AT 0614 Fall 2004. The Changing Beef Industry. Consumer. Beef Industry Production/ Marketing Chain. Livestock Marketing Information Center Data Source: USDA/NASS. Why had beef been losing favor with consumers?. Value per price Convenience

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Presentation Transcript
slide2

Consumer

Beef Industry Production/

Marketing Chain

why had beef been losing favor with consumers
Why had beef been losing favor with consumers?
  • Value per price
  • Convenience
    • 75% of working people have not decided what’s for dinner by 4 p.m.
    • over 50% of teenagers are responsible for their own meals
  • Product inconsistency

1 in 3 beef meals eaten away from home is unsatisfactory

  • Diet/health issues
a couple of facts to remember about beef consumption
A couple of facts to remember about beef consumption
  • Over 50% of beef is consumed as ground beef.
  • Approximately 50% of beef is consumed away from home.
slide8

Consumer

Beef Industry Production/

Marketing Chain

Retailer

who is the retailer
Who Is The Retailer?
  • Grocery/supermarket chains
    • Fresh, cured, frozen, cooked
  • Restaurants
    • Bubba’s BAR B Q to Ruth’s Chris Steakhouse
  • Fast food outlets
    • McDonalds, Wendys, Hardees, etc.
  • Convenience stores
    • Burritos, hotdogs, Slim Jims, etc.
the retailer s concern
The Retailer’s Concern
  • Move lots of product
  • Keep the price relatively stable
  • Product consistency
  • Keep the profit margin competitive with other products
slide11

Consumer

Beef Industry Production/

Marketing Chain

Retailer

Packer

the concentrated packing industry the big 5 process 85 of all cattle
The Concentrated Packing IndustryThe Big 5 process >85% of all cattle
  • Tyson (Previously IBP)
  • Excel (owned by Cargill)
  • Swift (Previously ConAgra)
  • National Beef Packing
  • Smithfield Foods
slide13

Beef Packers

1000 Head/day capacity

slide14

Consumer

Beef Industry Production/

Marketing Chain

Retailer

Packer

Feedlot

slide15

Feedyards

16,000 Hd.

One time capacity

the cattle feeder
The Cattle Feeder
  • The custom cattle feeding industry
    • Someone else owns the cattle
    • Feedlot sells feed, pen space, and management
    • Most of the cattle sold at the same price
slide17

High Plains

Commercial Feedlot

the cattle feeder18
The Cattle Feeder
  • The custom cattle feeding industry
    • Someone else owns the cattle
    • Feedlot sells feed, pen space, and management
    • Most of the cattle sold at the same price
  • Farmer feeder
    • Using cattle feeding to market grain crop and farm labor
slide20

Consumer

Beef Industry Production/

Marketing Chain

Retailer

Packer

Feedlot

Backgrounder/

Stocker

cattle backgrounder or stocker operator
Cattle Backgrounder or Stocker Operator
  • Transition from bawling calf to feedlot ready cattle
    • Health preparation
    • Market forages and low cost feeds
    • Repackage cattle -small groups to load lots
slide23

Consumer

Beef Industry Production/

Marketing Chain

Retailer

Packer

Feedlot

Backgrounder/

Stocker

Cow/calf

cow calf operations
Cow/calf Operations
  • Produce the raw product with which the rest of the industry must work
  • At the bottom of the dollar pipeline
  • Only segment that does not work with a margin
where are the beef cows state rank
Where are the beef cows?State Rank

1. Texas 5.483 mil. hd.

2. Missouri 2.125 mil. hd.

3. Oklahoma 1.970 mil. hd.

4. Nebraska 1.848 mil. hd.

5. S. Dakota 1.711 mil. hd.

where does virginia rank
Where does Virginia rank?

18 th. 810,000 cows and ahead of :

Arizona

Georgia

Idaho

Illinois

Nevada

New Mexico

Oregon

Utah

slide27

Commercial Beef Production

Total Cattle Inventory

Livestock Marketing Information Center

how do we produce the same tonnage of beef with fewer cows
How do we produce the same tonnage of beef with fewer cows?
  • Larger framed cattle
  • Improved reproductive and health efficiency
  • More Holsteins being finished instead of veal
slide29

$$$

Consumer

Beef Industry Production/

Marketing Chain

Retailer

Packer

Feedlot

Backgrounder/

Stocker

Cow/calf

current beef industry structure
Current Beef Industry Structure
  • Each production phase is a separate profit center
    • Retards innovation and new product development
    • Hinders information transfer
  • Does a poor job or relaying consumer signals back through the production chain
  • Has led to beef’s loss of market share
what if the different sectors decided to work together
What if the different sectors decided to work together?
  • Win back some consumers dollars
  • Start sharing some information up and down the chain to improve efficiency
  • Find out what the next sector needs and get paid for producing it.
alliances
“Alliances”
  • Another word for partners
  • Provides for sharing of information
  • Provides for profit sharing
forces driving alliance formation
Forces Driving Alliance Formation
  • Branded products
    • “50% of beef will be branded by 2005”
forces driving alliance formation34
Forces Driving Alliance Formation
  • Branded products
  • Improved consistency at retail level
forces driving alliance formation35
Forces Driving Alliance Formation
  • Branded products
  • Improved consistency at retail level
  • Need for information transfer
  • Source verification
  • Value based marketing
which steers are worth more to the industry
Which steers are worth more to the industry?
  • Which pen
  • subsidizes the price of the other?
forces driving alliance formation39
Forces Driving Alliance Formation
  • Branded products
  • Improved consistency at retail level
  • Need for information transfer
  • Source verification
  • Value based marketing
  • Matching supply and demand
  • Seedstock marketing
  • Reduced price volatility
components of many alliances
Components of Many Alliances
  • Retained ownership by feeder cattle producer
  • Value based marketing on some carcass grid
  • Sharing of risk and profit
  • Transfer of health, feedlot, and carcass data back to the cow/calf operator
slide41

Hypothetical Beef Product

Consumer

Low Choicefrom from 700-800 lb carcasses

Ribeyes 12 to 15 sq. in., <.25 outside fat

From cattle under 18 months

Feed vitamin E for shelf life

Feed vitamin D for tenderness

No intramuscular injections

Fed high grain ration > days

Unbranded hides

Retailer

Packer

Feedlot

Backgrounder/

Stocker

Cow/calf

slide42

Hypothetical Beef Product

Consumer

Low Choicefrom from 700-800 lb carcasses

Ribeyes 12 to 15 sq. in., <.25 outside fat

From cattle under 18 months

Feed vitamin E for shelf life

Feed vitamin D for tenderness

No intramuscular injections

Fed high grain ration > days

Unbranded hides

Retailer

Packer

Feedlot

Backgrounder/

Stocker

All the partners will have to work

together and communicate to share

to rewards for producing a product

the customer demands

Cow/calf

slide43

The romantic image of the independent cowboy continues to cost the industry market share and dollars

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