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December 17, 2018
Suggesting it’s been a wild ride on the path to profitability in the cow-calf sector during this decade is an understatement, to say the least. Beginning in 2009-10, cattle producers saw the most dramatic increase in cattle prices ever. From there, prices climbed to the point where we experienced historic highs just four years later. As would be expected, at the same time, consumers were experiencing historic high beef prices in the meat case.
What might not have been expected was that while lower overall beef supplies were causing these historically high live cattle and retail meat prices, demand by consumers for premium-priced branded beef continued to climb at the supermarket.
Select beef continues decline
In fact, it was during this time of record retail prices that for the first time, domestic sales volume of Prime grade and branded beef exceeded those of Select-grade beef. At the same time, since 2014 sales of Prime-grade beef have continued to increase by more than 40% in the U.S., while traditionally less expensive Select-grade beef continues to decrease in sales volume. Recently the Red Angus Association of America participated in a study resulting in speculation that Select-grade beef could actually disappear from the marketplace over the next decade. As recently as 10 years ago, Select beef amounted to 40% of all beef production. By 2025, it’s expected that beef graded Select will account for only 5% of the tonnage sold.
As further evidence of the consumer’s steadily increasing demand for premium-priced branded beef, Certified Angus Beef LLC experienced the 12th consecutive year of record sales of its signature Certified Angus Beef brand last year. And, in a recent “In the Cattle Markets” article, David Anderson, Texas A&M University Extension economist, suggested that even the higher-end Texas BBQ joints are increasingly buying briskets from upper Choice- and Prime-graded carcasses to use in their restaurants.
It’s nothing short of remarkable that the demand for higher-valued, high-quality beef continues to climb. A combination of factors has contributed to this shift, not the least of which is a recovered and strong economy. From a production standpoint, more Choice and Prime beef has been available to supply the growing demand as the result of genetic improvements, grid marketing concepts that reward quality, changes in feeding practices, and the industry-wide growth and acceptance of quality-based branded beef programs. As indicated earlier, there’s no change in sight for demand of high-quality beef, suggesting it’s important these production improvements at the farm level continue.
More attention on genetics, marketing
Management decisions made on the farm a decade or more ago that included improved genetics and attention to marketing have positioned many in the industry to capture the economic benefits of a consumer base that’s increasingly willing to pay for high-quality beef. Recognizing this demand is not only real, but growing, beef producers must ask themselves if individually they’re properly positioned into the next decade to capture the benefits that come along with this growing trend. As herd expansion has leveled off, farm managers can focus their attention moving forward to making the genetic and management adjustments necessary to take full advantage of these growing opportunities.
With bull buying season upon us, the focus on genetics comes to the forefront. Seldom has the scrutiny placed on carcass genetics been to the point where it had the potential for so much impact on the long-term future of individual herds. The demand for seedstock with high marbling, yet also high-yielding genetics, continues to grow. While it’s likely that cattle breeders will increasingly demand high-marbling genetics, it’s not hard to also imagine cattle feeders may soon be asking for data confirming the feeder cattle they purchase have high-marbling and high-yielding characteristics. While marketability and price premiums for verified, high-marbling-potential feeder cattle and calves will increase in the years ahead, discounts on those with low or unknown marbling potential will become more severe.
Looking forward, to remain on the leading edge of the consumer’s growing demand for high-quality beef produced in a sustainable production system, genetics and herd management must be clearly focused on maintaining herds that result in satisfying the end user.
Smith is a program assistant in the Fairfield County OSU Extension office and a member of the OSU Extension Beef Team. The Beef Team publishes the weekly Ohio BEEF Cattle letter, which can be received via email or found at beef.osu.edu.
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