Premium Beef Markets, Let’s Plan for the Future

– Dan Loy, Iowa Beef Center Director (originally published in the Iowa Beef Center Growing Beef newsletter, May 2015)

We celebrate Beef Month with near record highs of cattle and the beef product values. We have been accustomed to strong consumer demand and near shortages in fed beef supplies. This has led to increased carcass weights to make up for supply shortfalls and a resultant trend in carcass quality with the percent of cattle grading USDA Choice and Prime at historic levels. This trend will likely continue until beef cow and feeder cattle numbers are rebuilt and supplies of cattle on feed increase.

Even though this short cattle supply may be with us for some time, preparing for a more discriminating market may be a good plan. As supplies increase, look for buyers to exercise more scrutiny in sourcing their beef supplies. This could be in the form of additional premiums and discounts in grid and formula marketed cattle. It could also involve more premiums offered for verified programs that differentiate cattle based on production processes, genetics or other practices.

In addition to market demand changes for quality that will require potential adjustments in genetics, management or marketing, there are other trends that are worth watching that could impact market programs. One example is the consumers’ growing curiosity about where their food comes from and how it is raised.

Documentation of animal care is a growing trend. For example, Tyson, with their Farm Check program may be the first of several buyers that will require training in Beef Quality Assurance and/or audits of animal care and handling. McDonalds plans to source verified sustainable beef by 2016. The Global Roundtable for Sustainable Beef has established principles and criteria that will define sustainable beef production. The U.S. Roundtable for Sustainable Beef will establish benchmarks and verification. Following this process may help producers maintain continued market access. Natural programs that require verification of the use of specific production practices or the non-use of certain technologies are growing.

So, what can help you today to prepare to capture more value in the future? Records. Establishing a record keeping system that allows you to document production practices, animal care and resource use will give you a start on any verification program that might be required to access a specific market or capture a premium. Written standard operating procedures may be required for some activities. Also, having a good handle on production costs and inputs will help you evaluate the necessary premiums needed to reduce or eliminate technologies to fit a specific verified program.

Of course record keeping isn’t necessarily a favorite activity of many beef producers. However, the good news is that the rapidly changing world of electronic technology is making this easier. Tablet and smartphone apps are being developed and soon the “internet of things” may automate some of this record keeping.

The beef consumer is changing and along with this change will come changes in the markets. Watching these trends and building the capacity to react will help prepare you for the future. For now, take advantage of the good prices and throw some of those Choice and Prime steaks on the grill. It is Beef Month, you know.