Betty Jo Gigot, Editor and Publisher

A Global Perspective of the Cattle Industry

The U.S. cattle and beef industry is operating in a global market, not just a domestic one. That was the consensus when about 200 people gathered for the 2007 International Livestock Congress at the Renaissance Denver Hotel Jan. 9. Sponsored by the National Cattlemen’s Foundation, “Global Beef: Thinking Beyond the Fence” was hosted by the National Western Stock Show and the International Stockman’s Educational Foundation, a first.

All segments of the industry were represented in morning panels focused on the challenges and opportunities faced by the industry domestically and internationally. The session was moderated by Tom Field, Ph.D., of Colorado State University.

Each speaker agreed that the days of focusing solely on the domestic consumer – and domestic production – were over.

“It’s no longer a U.S. market; it’s fast becoming a global market,” said Norm Bessac, vice president of marketing and key account management for Cargill Meat Solutions. “Globalization is absolutely coming.”

Kevin Yost, executive vice president for customers and supply chain at Swift and Company, agreed, saying, “the greatest opportunity lies outside our borders.

“We must have a larger global footprint to compete,” he said. That’s complicated, he said, because U.S. companies “don’t have fair access to the 95 percent of consumers who live outside of the United States.”

Companies are overcoming that, Yost said, by establishing operations in other countries. According to Yost, the scale of all operations will have to increase in order for companies to compete. Swift now has significant packing capabilities in Australia, for instance.

Philip M. Seng, president and CEO of the U.S. Meat Export Feder ation, said that while it has been a challenge overcoming the BSE issue in many parts of the world, “the future for U.S. beef is very, very bright internationally.” U.S. beef exports are back up to about 600,000 metric tons of product January through October 2006, and the goal is to be at pre-2003 levels by 2009.

“It’s been a challenge convincing foreign governments to accept OIE (World Organization for Animal Health) standards,” he said. “The politics have been more difficult than the disease itself.”

The United States had been the world’s number two exporter of beef, exporting to 133 countries prior to the discovery of BSE in the United States in Dec. 2003. Within 48 hours of the discovery, 72 countries had closed their borders to the product.

The industry is staging a comeback, however, and the efforts to focus on export markets are justified, Seng said. Eighty-five percent of proteins worldwide are being consumed outside the United States.

The final result
Whether domestic or international, panelists suggested that the end consumer should receive more attention from all segments of the industry.

“We need to build the relationship between producers and consumers,” according to Mel Coleman of Coleman Natural Foods in Colorado. That relationship includes letting consumers know how committed producers are to doing things right.

“We must build a reliability and consistency that builds brand loyalty,” he said. Doing this would help increase competitiveness of U.S. companies against beef from other countries.

“We’ve gotten into a commodity mentality,” according to Coleman, with the industry basing everything down the chain on the end price.

Yost agreed. “Domestic and international consumers will pay a premium for quality,” he said. Yost said the beef business today is Û not about selling a commodity; companies must have “prescriptive” cattle to meet consumer needs.

Cargill’s Bessac said the industry has the opportunity to create demand for its products, but must make sure those products meet specifications. Consumers have become demanding, he said, and “there are more reasons not to buy beef than there ever were.”

Unrealistic expectations by consumers have become the norm, Yost said, and while they can be exaggerated it won’t be by much. “They want to have that great Del Frisco’s eating experience at home – and they want to do it in the microwave,” he said.

There are many more consumer segments out there, each with its own needs and wants, according to Bessac. For this reason information will be at a premium at each stage in the production cycle.

An information void
“There’s going to be a continued need for information,” Bessac said. Industry segments are going to have to partner with others in the chain to assure information is available to meet needs for regulations and consumers.

“We have to have fair signals, fair rules,” he said. “There has to be a clear understanding of how things move back and forth.”

This will mean a proliferation of partnerships, Yost said. “Companies and producers must align to survive, with signals between chain segments as direct and clear as possible,” he said. “And information in the form of animal ID will have value.”

Animal identification as a means of information sharing was a major topic during the panel discussions. Warren Weibert, owner and manager of Decatur County Feed Yard in Oberlin, Kan., said he has been actively involved with animal identification since 1994, and it’s been a positive experience.

“Without electronic ear tags we couldn’t begin to do what we do,” he said. Using the process allows his feedyard to show ranchers their animals’ performance, he said.

“For us it’s a marketing tool,” Weibert said. “It’s also a traceback tool.”

Animal ID is an investment in the new way that we market our product,” said Mel Coleman.

These kinds of identification are different than the kinds the government wants to institute for herd security purposes, according to Jim Warren, owner and manager of 101 Livestock Market in Aromas, Calif. 101 Livestock Market was the first livestock sale barn in the West to install a USDA-approved QSA marketing program that verifies the cattle’s source and age through animal ID and birth records.

For herd security purposes, Weibert says, a government-mandated ID system should be mandatory. “If we had a [mandatory] program tomorrow, the industry would be better off,” he said. “A voluntary ID program is no program.”

According to Cargill’s Bessac, identification should be considered a long-term strategy and not about who will make money on it. Consumers are demanding more information to assure themselves that beef they’re buying is safe and wholesome. “It’s a cost of doing business,” he said. “How do we build consumer confidence in our product?”

Dave Hamilton, a cow-calf producer in the Nebraska Sandhills and a member of the Nebraska Beef Council’s Board of Directors, said he could be happy with a voluntary identification program. He said “market signals are the key” to making sure information gets to where it needs to be.

Producing for the consumer
More than anything, the production process must be designed with the consumer in mind, panelists agreed.

“Are we going to produce for quality or are we going to produce for size and efficiency?” asked Bessac. He said all consumer factors – taste, tenderness, juiciness – needed to be looked at to make sure consumers had a more enjoyable experience.

“We have to look at the consumer,” Weibert agreed.

The focus on the end user needs to take a less adversarial approach within the industry than has been shown in the past, Weibert said. The ongoing destructive, antagonistic battles between feeders and packers and between cow-calf operators and feeders should cease. “If we continue to have that philosophy, we all become losers,” he said.

USMEF’s Seng said the export market also required that kind of cooperation. “How well we cooperate will determine how well we compete,” he said.