Rarely found on menus in the U.S., variety meat – also called offal or fancy meat – takes many forms: kidneys, livers, stomachs, tendons, aortas, cheek meat, oxtails and more. And because it's highly sought after in key export markets of Egypt, Japan, Peru and Mexico, variety meat is gold to the U.S. beef industry.
According to the U.S. Meat Export Federation, total U.S. beef exports in 2012 set a new record at $5.51 billion. Beef offal represented $703.1 million, or about 12% of that. It also accounted for 28.4% of the total volume of beef exports.
And, virtually 100% of the U.S. livestock herd is represented in variety meat exports – some part of every animal is sold to international customers.
"Demand for both large and small intestines would tank without the international market," said Jerry Wiggs, export salesman for Greater Omaha Packing Company Inc. "We are selling large intestines to South Korea or Koreans who recently moved to the U.S."
Wiggs said OPC just recently resumed selling small intestines to Mexico, where they had been banned since BSE was found in the U.S. in late 2003.
"Without those countries, the markets for those products would basically disappear," he said.
The same can be said for many beef variety meat items. More than 90% of U.S.-produced beef tongues are exported, primarily to customers in Northern Asia and Mexico. Buyers in the Middle East, South America and Russia – when the Russian market is open – buy more than 9 out of 10 U.S. beef livers, hearts and kidneys. Consumers in Mexico and Southeast Asia consume more than 75% of U.S. beef stomachs.
Not only are international destinations important for consumption of beef items that aren't eaten in the U.S., but variety meat could be considered a "gateway meat" for consumers first trying U.S. products.
"There are many examples of how variety meat items are the first point of entry for U.S. beef into developing markets," said Mark Gustafson, vice president of international sales at JBS. "These consumers may be seeking protein, but they can't always pay the price of high-end cuts. Variety meat items are very economically priced protein."
For example, he said, interest is growing in beef kidneys to the Ivory Coast and hearts to Peru, which could open a door to other exports down the road.
Gustafson noted also that even top beef export markets started out primarily as variety meat markets.
"Japan and South Korea are prime examples," Gustafson said. "When there was a beef import quota in Japan, they didn't have a quota on variety meat, such as outside skirts and hanging tenders. Japan's yakiniku industry grew up around variety meat items that were outside the quota with lower duties."
The same goes for Egypt – it once was strictly a liver market, but now buyers there are purchasing muscle cuts.
Gustafson noted that the U.S. beef industry has not always produced variety meat items such as beef finger meat and chuck flap. At one time, they went directly into trimming.
"Now, it's not unusual to have an executive from a visiting Asian meat company stand in a processing plant at the trim belt to see what's going into rendering or trimmings and ask for samples," he said. "They know what a strip or tenderloin is, but they're looking for an item to use in soup or as a protein supplement."
The importance of market access
The premium prices that offals can generate internationally are only meaningful when the United States has unfettered market access, the U.S. Meat Export Federation said. That message has been illustrated twice in 2013 – once as market access was lost and another when access was regained.
Beef livers are one example. There are two prime international markets for U.S. beef livers: Russia and Egypt. The bottom fell out of liver prices when Russia stepped up enforcement of its zero-tolerance policy for residues of the livestock feed additive ractopamine, effectively closing the market. This action led to liver prices dropping from about 64 cents per pound to 39 cents – a loss of about $3.50 per head just from that one cut. When shipping access to Egypt was threatened by unrest in the Middle East, the price was poised to plummet to 7 cents.
"Russia was a huge niche market," Wiggs said. "The closing of Russia made Egypt the only game in town (for livers), and they knew it. If Egypt stopped taking livers, they would go into rendering or pet food."
Russia has a similar effect on beef cheek meat, according to Veronica Leon, vice president of sales for Northern Beef Industries.
"When Russia buys, prices rises about 15 to 20%," she said. "Russian buyers will come in and clean out our inventory." With about 4.25 pounds of cheek meat per animal going for roughly $1.37 per pound, that Russian presence in the market can add another $1 or so in value per head for this item alone.
While the disappearance of Russia from the market has depressed prices, the opposite occurred when Japan expanded access in February to include beef from U.S. cattle up to 30 months of age. Demand surged for U.S. beef tongues. For an item that averages 2.8 pounds per animal, the jump from $2 per pound to $4 boosted the value per head from this single cut by about $5.60.
Leon noted that Mexico also is critical for profitability on beef tripe and lips.
"If Mexico closed, a big percentage of beef tripe likely would go to rendering," she said. "We'd probably lose $4 to $4.50 per animal. And beef lips are a huge item for Mexico. I have no record of lips going anywhere else. There's almost 3 pounds per head, and they're being sold high: $1.75 to $1.85 per pound delivered FOB to Mexico. Demand is great for them in Mexico, but in the U.S. they would have no value at all, and would probably end up in pet food."
USMEF promotes variety meat in the international marketplace, and while variety exports have increased in recent years, exporters believe that there is room for continued growth.
"Prior to the finding of BSE in the U.S. in 2003, South Korea – along with Mexico – bought almost 100% of the small intestines," he said. "But we're really not back into that market yet. As each market opens or expands, it creates more opportunity to move the value base up.
"When I first started in this business, variety meat was an afterthought," he said. "The quality was generally poor. Most would be sold for pet food. Today, the packaging and quality (of variety meat) has almost become a science in itself. We look at the international markets as premium markets, in large part because of variety meat."
"The reality is that one or more parts of every beef animal produced in this country is being enjoyed by consumers around the world," said Dan Halstrom, senior vice president of Marketing and Communications for USMEF.
"USMEF is targeting specific countries – and niches within those countries – to demonstrate to meat buyers, food service and retail operators how different muscle cuts or variety meat items can be an ideal solution for their business.
"It's an education process, but we're seeing growth and expect it to continue," he said.