The Beef Markets Are Not True Free Markets

Beefs and Beliefs

The current grading system acts as a market barrier and a potentially unbreachable paradigm.

Published on: September 19, 2013
 

I'm disappointed in the feedback on my last blog about possibly creating a new beef grade for forage-fed beef, destined primarily for the growing ground-beef market.

It appeared to me a lot of people just didn't understand the reasons such an addition might be valuable. Perhaps I failed in explaining them, so I'll try again.

Remember above all what economist-consultant Bill Helming said about price: "The majority of consumers don't know or care how beef is produced. Can I afford it? That's the number one question."

This is confirmed again and again, in study after study.

Remember, too, that the economy is not getting any better and consumers are struggling across the spectrum. Only the richest 1% has made any gains in the last six years or so.

Beef conundrum: While ground beef sales are improving, whole muscle cuts have been declining and look like they will continue to do so in the face of limited consumer incomes.
Beef conundrum: While ground beef sales are improving, whole muscle cuts have been declining and look like they will continue to do so in the face of limited consumer incomes.

Therefore ground beef is the only product our industry fabricates which the majority of consumers believe they can afford regularly.

Yet what does our industry and the grading system focus on? Steaks! Quality! Marbling!

This kind of thinking permeates the grass-fed beef segment of the industry, too. The only exception is Thousand Hills Cattle Company, which actually focuses on ground beef. Still, Thousand Hills focuses on the upper crust -- the wealthier consumers who want the benefits of higher omega 3 fatty acids and higher amounts of conjugated linoleic acids in their meat.

These are all premium markets with premium pricing. These all ignore what Helming is saying about the long-term trends in beef marketing, consumer incomes and consumer spending.

Moreover, the grading system and the mindset it creates are market barriers. They help prevent a truly free market which, if it existed, would indeed find ways to meet the needs and desires of its consumers.

Instead, I heard comments that ran primarily along these three lines:

* If the market wanted more cheap ground beef it would already have created that system.

* With grassfed beef, the grade is the brand (meaning consumers are already buying the product they want.)

* Even with grassfed beef, I like my steaks marbled comparable to Choice.

All these statements miss the mark completely. All are utterly colored by the attitudes inherent in the current grading and marketing system.

If "the market" would create cheap beef as needed, why are we grinding huge amounts of rounds and roasts/chucks every year from expensive, grain-fed cattle? Expensive carcass parts are going into cheap product. It would be comparable to the chicken industry grinding a big portion of its boneless chicken breasts for poultry-sausage products.

If "the market" were truly capable of meeting demand on its own, why are the grass-finishers struggling to meet the high-dollar market share they already appear to own?

If the primary market for beef were Choice steaks why is ground beef the only segment of the overall beef market posting significant gains in the animal-based protein consumer market?

I don't know that Bill Helming's idea for adding a grass-fed/forage-fed grade will solve these problems.

I do know that most of the responses I received on my recent blog on that topic only proved how insidiously subconscious are the biases of the current grading system.

So I'll repeat what everyone needs to know. Quality beef, such as Choice steaks, are an important part of the market. Yet consumption of whole-muscle cuts from the beef carcass is declining. Only ground beef consumption is increasing. Only ground beef can compete reasonably with chicken, which is now king of the protein hill.

Helming thinks if we don't find more and better ways to compete for consumers' limited protein dollars we could end up like the American sheep and lamb industry.

That's a dreadful mental picture to me. How many sheep producers and lamb-eating consumers do you know?