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Supplying consumer demand

We are all aware that beef prices in all segments of the industry are at an all-time high. This is most welcome but it might also be a great time for our industry to examine what is happening and why. It is easier for an individual business and an industry to adjust in good times.

The question now is how do we position ourselves for a profitable future?

Most of the information in this article is from Bill Helming, a U.S. ag economist, agribusiness consultant and author who has put out a report entitled Bill Helming’s Wakeup Call.

In it he presents some ideas that are disturbing. For example, he says most of today’s better beef prices are a direct result of our reduced cow herd. Meanwhile consumer demand for beef in the form of consumption has declined dramatically and continues to decline. This is not good news if we wish to maintain a large, viable and profitable industry.

Bill uses U.S. numbers but I am sure the same trends apply in Canada. In the U.S. there has been a 40 per cent decline in per capita consumption of beef since 1976 and a 99 per cent increase in per capita consumption of chicken over the same 38-year period. Most of the reduction in beef consumption is related to price. To maintain a healthy industry we must learn to produce beef at a lower cost.

The U.S. beef industry has lost 44 per cent of its market share to chicken and turkey over this span.

There are some bright spots, however. In 1970 ground beef accounted for 42 per cent of beef consumption. In 2013 it accounted for 57 per cent of beef consumption. The demand for ground beef has increased 36 per cent in the last 38 years. This trend is continuing and it is something we need to be aware of and something we need to address.

I see two basic outcomes to the trends that have been taking place over the last 38 years. One is to ignore the consumers’ demands and continue to produce beef using our current model that will result in fewer and fewer cows and fewer producers. The beef industry will be smaller as it will produce a luxury item for the more affluent consumers. This does not appear to me to be a wise choice.

The second is to recognize and respond to the consumer demand. This model would result in some fundamental changes to our industry but it should also give us a growing industry producing a healthy, affordable product for a large number of consumers. This appears to me to be a much better choice.

Bill suggests that the opportunity for our industry is to make beef more affordable as we move ahead. Please don’t quit reading at this point.

Making beef more affordable implies making change to our industry but it does not imply making our businesses less profitable. In fact making change and following consumer demand has the potential to result in more profit.

Changes we might consider

  1. Continue to produce high-quality grain finished beef.
  2. Develop a parallel system that focuses on producing economical, healthy ground beef.
  3. Aim for a lower cost of production at all stages of the industry.
  4. Raise smaller-framed, lighter-weight cattle.
  5. More cattle with a frame score of three to five.
  6. Breed for grass genetics.
  7. Use less grain in the rations.
  8. Use more forages.
  9. Slaughter cattle at an older age. It was common yearsago to slaughter cattle at three to five years of age. Perhaps we should be selling 2-1/2-year-old steers instead of long yearlings.

I am not sure how changes like these might occur. But it appears change may be necessary to ensure we have a strong, viable industry as we move ahead. Change requires leadership. This might be a great place for the CCA and our provincial cattle associations to step in and help map out a viable, profitable industry for our future.

What is your opinion?

Don Campbell ranches with his family at Meadow Lake, Sask., and teaches Holistic Management courses. He can be reached at 306-236-6088 or [email protected].

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Don Campbell

Don Campbell ranches with his family at Meadow Lake, Sask., 
and teaches Holistic Management courses.

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