WHAT'S YOUR BEEF?

AUTHOR'S NOTE - All of the premises presented in this series of posts are solely based on personal experience as a livestock producer and strictly as a cattleman (I have a basic understanding of farm commodities markets, but no real experience with such, and cannot speak with much authority from the farm side of things; Though I would think there are going to be some similarities). The information represents my opinion and is based on personal experiences. Any factual information may or may not be referenced, but be aware, the majority of the content is personal conjecture. Dialogue and comment are welcome.


“Don’t Sell the Steak—Sell the Sizzle!" (Elmer Wheeler; "Trusted Sentences that Sell", 1937)

"Oh, the power of marketing". We have all heard that said, but, just what is Marketing? Well, the answer is based on who is being asked.


- Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” (Small Business Branding)

- Marketing is based on thinking about the business in terms of customer needs and their satisfaction. (Business Dictionary)

I see the practice in very simple terms: Marketing is about exchanging value through the use of "half-truths".

EXAMPLE: "The" customer is health conscious and knows "whole grain" bread is better for them, so:
Marketing is a loaf of bread label that says "made with whole grains" and has the                   American Heart Association seal of approval. Sounds healthy, right(?)...until you read the ingredients and see it is made with high fructose corn syrup, dextrose, and a load of preservatives.


In essence, our food industry markets or advertises what the consumer wants to see or hear.  They "market" half of the truth....the whole truth is right there on the label as well...in "itty bitty" small print.

http://www.angus.org/

Which, brings me to the selling of beef and the marketing juggernaut known as "Certified Angus Beef" or CAB for short.

Now, traditionally, beef has been sold in steakhouses and supermarkets based on USDA grading (Prime, Choice, Select, etc.); however, many restaurants and retailers have recently begun advertising beef on the strength of brand names and the reputation of a specific breed of cattle.

The American Angus Association set up the "certified Angus Beef" brand in 1978. The goal of this brand is to promote the idea that Angus beef is of higher quality than beef from other breeds of cattle. Cattle that are at least 51% black and exhibit Angus-type characteristics are eligible for "Certified Angus Beef" evaluation.

Before the advent of the Certified Angus Beef brand, beef was just, well, beef. The commodity was bought and sold, based on grade with little, if any, preference to breed. Branding was the sole province of the Swift, Armour, and Stanko meatpacking companies.

The CAB concept was revolutionary and changed everything. The American Angus Association took their message straight to the consumer and then "partnered" with the meatpackers to create the image that angus beef actually tasted better than other breeds. Today, Certified Angus Beef is the world’s largest branded beef program, commanding an eye popping 60% market share.

THE HALF-TRUTH
Wow! When the consumer buys a package of beef with the CAB label, they are getting pure angus meat, right? Originally that was true, but today, certified angus beef comes from an animal that has just 1/8 angus in its bloodline or breeding. It doesnt come from pure bred angus cattle... just an animal that has angus somewhere in its breeding. If certified angus beef came from 100% angus cattle there would not be enough to supply the demand, thats why it comes from an animal that is known to have angus in its breeding. Clever, huh(!)?

THE TRUTH
In the United States, the USDA operates a voluntary beef grading program. The meat processor pays for a trained USDA meat grader to grade whole carcasses at the abattoir. The grades are based on two main criteria: the degree of marbling (intramuscular fat) in the beef rib eye (at the 12th rib cross-section), and the age of the animal prior to slaughter. Most beef offered for sale in supermarkets and most restaurants is graded choice or select. Less than 3% of all beef gets the highest grade of Prime beef and the majority of that is sold to exclusive hotels and upscale restaurants.

The USDA Grade Inspector Does Not take into consideration what breed of cattle they are inspecting. In fact, they rarely know which breed they are grading!

So, kudos to the Angus Beef folks...masterful job of Selling the Sizzle! And, in all fairness, they do provide a quality product...but, so do the producers of non-Angus breeds.

POP QUIZ:
These two Ribeye Steaks are of equal grade...Can you tell which one is Certified Angus Beef? (Look closely for a clue in one of the pics)

FYI: USDA BEEF GRADES

USDA Prime — highest in intramuscular fat. (Currently, only three percent of the steaks sold are USDA certified Prime.)
Choice
Select — the leanest grade commonly sold
Standard
Commercial
Utility
Cutter
Canner
**Ground Beef is not Graded**


Sign That the Apocalypse is Upon Us:
The "Big Three" national hamburger chains, notorious buyers of the lowest quality beef, are now promoting (marketing) the addition of Angus Beef Hamburgers to their menus.

USDA GETS IT RIGHT WITH "KNOW YOUR FARMER" PROGRAM

"Today, there is too much distance between the average American and their farmer and we are marshaling resources from across USDA to help create the link between local production and local consumption" - Know Your Farmer, Know Your Food


The USDA is getting this one right. The Know Your Farmer, Know Your Food initiative emphasizes the need to create a "reconnection" of U.S. farmers to the consumer. Some 50+ years back, the majority of our food came from farms within a days driving distance. Today, most of the grocery market offerings have traveled from California to New York, Florida to Texas...not to mention the fruits, vegetables, and meats that are imported from Mexico and South America in the "off season". Now, under the auspices of the 2008 Farm Bill, the USDA has launched a program to promote local farmers to the consumer.


 The following, from the "Know Your Farmer" web page, actually states the program mission very clearly:

_Know Your Farmer, Know Your Food (KYF2) is a USDA-wide effort to carry out President Obama's commitment to strengthening local and regional food systems. 
_We know that demand for local and regional foods is strong, as consumers across the country are looking to connect with their food and the people who grow and raise it:

_The number of farmers markets has more than tripled in the past 15 years and there are now more than 6,100 around the country;

_In 1986 there were two community supported agriculture operations, today there are over 4,000;

_There are farm to school programs in 48 states, totaling more than 2,200 and up from two in 1996;

_All 50 states in the U.S. have agricultural branding programs, such as "Jersey Fresh" or "Simply Kansas;"

_And the National Restaurant Association declared "locally sourced meats and seafood" and "locally grown produce" as the top two trends for 2011.

Local and regional markets often provide farmers with a higher share of the food dollar, and money spent at a local business often continues to circulate within community, creating a multiplier effect and providing greater economic benefits to the area.

An Economic Research Service Study (May 2010) identified barriers to local food market entry and expansion, including capacity constraints for farms, a lack of infrastructure for moving local food into mainstream markets, and regulatory uncertainties. This is the work of the Initiative.

Our mission is to strengthen the critical connection between farmers and consumers and supports local and regional food systems. Through this initiative, USDA integrates programs and policies that:

_Stimulate food- and agriculturally-based community economic development;

_Foster new opportunities for farmers and ranchers;

_Promote locally and regionally produced and processed foods;

_Cultivate healthy eating habits and educated, empowered consumers;

_Expand access to affordable fresh and local food; and

_Demonstrate the connection between food, agriculture, community and the environment.

Know Your Farmer, Know Your Food also leads a national conversation about food and agriculture to strengthen the connection between consumers and farmers.

"The largest 12.4 percent of farms in terms of gross receipts received 62.4 percent of all government payments in 2008." - Farm Commodity Policy 

I heartily applaud the USDA for this initiative and have high hopes that this is a "turning point" in government recognition of the plight of the family farm in America.




 

MEATPACKERS OPPOSITION to GIPSA RULE SHUTS OUT SMALL LIVESTOCK PRODUCERS

Fair, open and transparent markets are essential to rural economic recovery.  We need strong rules to curb corporate control over livestock and poultry markets and to foster a livestock industry in which small and mid-sized farmers and ranchers can thrive. - Sustainable Agriculture Coalition




House blocks GIPSA* rule, defeats income limit
Friday, June 17, 2011 

The U.S. House on Thursday knocked down proposals to set new income limits for farm program recipients and slash funds for an important export promotion program.... The House scrapped Rep. Jeff Flake’s (R-Ariz.) proposal to set an $250,000 annual adjusted gross income (AGI) limit for farm program eligibility. The current limit is $500,000 in AGI from off-farm sources or $750,000 in on-farm income...Flake also lost a bid to eliminate funding for the popular Market Access Program, which helps producer groups promote products overseas.
 (Read the Article here)

THREE YEARS AGO, Candidate Barack Obama promised to stand up for open andfair markets for family farm livestock producers.

THREE YEARS AGO, Congress passed a farm bill directing USDA to write rules to end price discrimination against small and mid-sized farmers by corporate meatpackers and processors and to ensure fair production contracts for poultry and hog producers.

ONE YEAR AGO, USDA issued a proposed rule that would reign in some of the worst abuses of giant meat packers and poultry companies

THREE WEEKS AGO, Our congress caved in to large special interests (Meatpackers and Integrators) and stripped any meaningful legislation out of the Proposal that could help the small farmer and rancher.

The proposal to set a lower annual AGI (Adjusted Gross Income) would have channeled more money to the small agricultural producer. Instead, by "stripping" the lower AGI proposal, the majority of subsidy dollars will continue to go to large corporate agricultural operations.

The Market Access Program that was also scrapped would have opened up avenues for small livestock producers and groups to overseas markets...these markets are currently almost impossible to enter without the clout of large enterprise. 

The following best explains what this means to livestock producers:

The Case for Competition

By: 

 John Crabtree

Livestock markets don't work. I should say they don't work for family farmers and ranchers - meatpackers don't have any complaints.

If you raise cattle, hogs or sheep then you sell into a largely dysfunctional market where packers hold all the cards and routinely discriminate against smaller producers by offering massive, volume-based premiums to large, industrial producers (and deep discounts to smaller farmers and ranchers).

How massive? Take a small hog farmer with a 150 sow farrow-to-finish operation that receives a small-volume discount of 6 cents per pound for his market hogs - a conservative estimate for volume discounts. At 250 pounds for each of 3,500 hogs marketed, that would mean an annual loss of $52,500 for that producer, simply for being small.

USDA is poised to propose a new rule under the Packers and Stockyards Act that will, hopefully, help address this price discrimination against smaller producers. The rule will define the term "unreasonable preference," the granting of which is prohibited under the Act but has not been well enforced absent a definition of what constitutes an "unreasonable preference."

The packers will hate whatever they come up with. But, honestly, USDA has given the packers a pass on competition laws for decades, so why should we listen to them on this one? Family farmers and ranchers want, need and deserve competitive markets in which to sell their livestock. Agriculture Secretary Tom Vilsack should end the volume-based discrimination against small volume producers and breathe some life into their livestock markets. - Center for Rural Affairs

What does this mean to the average consumer? Higher prices, fewer choices, and the continued decline of an American Icon...the Family Farm








*Grain Inspection and Packers and Stockyards Administration - Part of the U.S.D.A

TEXAS DROUGHT THREATENS NATIONAL BEEF SUPPLY

AUTHOR'S NOTE - All of the premises presented in this series of posts are solely based on personal experience as a livestock producer and strictly as a cattleman (I have a basic understanding of farm commodities markets, but no real experience with such, and cannot speak with much authority from the farm side of things; Though I would think there are going to be some similarities). The information represents my opinion and is based on personal experiences. Any factual information may or may not be referenced, but be aware, the majority of the content is personal conjecture. Dialogue and comment are welcome.


Beef is the No.1 selling protein in the United States. Last year, consumer spending on beef totaled $74.3 billion. Per capita consumption of beef in 2010 was 59.6 pounds while per capita spending for beef was $240, according to industry research firm CattleFax.

 In the state that gave birth to the cowboy and spawned the culture of cattle drives, modern-day ranchers are fighting for survival. Severe drought (the worst in 44 years) and several million charred acres from wildfires have delivered a devastating "gut" punch, forcing ranchers to take drastic measures to save ranches across Texas. The state's livestock industry has lost $1.2 billion under withering conditions, according to the Texas Agrilife Extension Service, a service branch of Texas A&M University.

In Texas and other states with large cattle herds, the beef supply chain starts at the ranch. Ranchers own a herd of beef cows, each of which gives birth to a calf once a year. The mother nurses the calf and the pair graze on grass through the summer and into the fall, whereupon the fattened calf is sent to market.

This year, ranchers should be reaping the benefits of high prices, low supplies and high demand for their beef. The demand for calves from feedlots, where cattle add hundreds of pounds before slaughter, seems insatiable. Without rangelands full of nutritional forage, cows will struggle for nutrients. The herd will lose interest in breeding and cows may not provide enough milk for their calves, bringing the critical first step of America's beef cycle to a halt.

Among all meat production, beef producers typically incur some of the highest production costs. For example, costs for raising cattle are much higher than for poultry farming. Cattle producers pay more for each animal, grazing lands, fertilizers, feed and processing systems versus poultry farmers. Also the time it takes to prepare cattle for sale is much longer compared to other meats. It takes just 46 days for chicken to be market ready, but can take up to two years for beef.

Exacerbating the situation further is the shrinking number of cattle available for consumption. As beef producers struggle with the escalating drought, rising business costs, and mounting debt, more of them are selling their heifers for meat production, instead of breeding them to expand the herd. In Texas, the largest producer of cattle in the U.S., the "state herd" is down nearly 18% since 2008. In fact, ranchers and farmers across the country are shrinking their herd sizes bringing the nation's cattle herd count to it's lowest since 1958.


ADDING SALT TO THE WOUND:

The outlook for more rain looks grim. The National Weather Service's Climate Prediction Center forecast below-normal rainfall for Texas over the next month at least.

The WACKY WORLD OF CATTLE and COMMODITY PRICES

AUTHOR'S NOTE - All of the premises presented in this series of posts are solely based on personal experience as a livestock producer and strictly as a cattleman (I have a basic understanding of farm commodities markets, but no real experience with such, and cannot speak with much authority from the farm side of things; Though I would think there are going to be some similarities). The information represents my opinion and is based on personal experiences. Any factual information may or may not be referenced, but be aware, the majority of the content is personal conjecture. Dialogue and comment are welcome.


Well...several months of research and data down the drain! 


Here I was, all set to show you how the retail price to the customer was going to sky rocket this summer, how the price of corn and feed grains were too high for cattle producers to profit and, in general complain about how the cattle producer was being squeezed. 


Then, last week (June 30, to be exact), The USDA released "The Crop Report". 


Let me set this up...
In a nutshell, I was going to show:


1. Based on the late spring flooding of hundreds of thousands of acres of corn through the Midwest to Arkansas and Louisiana, the persistent cool weather and rains across the farm belt that have delayed annual plantings, and the devastating effects of storms and tornados across the mid-section of our country as well as through the South would drive the prices of corn and grains to all time highs. 


2. Because these commodities were the back bone of "grain fed" beef, the price of consumer prices for beef would rise, while the cattle producer would struggle to make a profit DUE to the higher costs associated with feeding cattle grain. 


AND, I was right (ever so briefly) ...corn and soybean prices were soaring and cattle producers, who are currently reaping very high prices for their cattle, were having their profit squeezed by the high cost of feeding corn...


Which brings me back to "The Crop Report"......

Turns out, the expected 2011 corn harvest will be much higher than expected and the harvest of other important food grains are also going to be well above average......This caused both corn and soybeans to back off of their "highs" by more than 10%. Grain commodities will continue to trend down over the next few weeks to very manageable cost levels for the beef industry.

GRAINS-U.S. corn extends losses after USDA report
                                                                                        Reuters News Service

So, what we have, currently, is the most rare of events in the cattle markets. The producer is actually receiving record prices for cattle while also enjoying "cheap feed"!! In other words, cattle producers are in a position to maximize profits not only through "lower input costs", but also while receiving historically high prices for their livestock.

"

Compared to last week’s sharply higher market, yearling feeder cattle 

continued their momentum and sold firm to 5.00 higher.  Steer and heifer calf 

demand improved on the heels of last week’s gains and traded from steady to 

6.00 higher with instances as much as 10.00 higher.  The most impressive 

signal of this week’s higher trade was the fact that it took place on fairly 

heavy receipts for this time of year with no help from the CME futures or fed 

cattle trade until the tail-end of the week." - USDA CATTLE AUCTION REPORT, JULY 1, 2011

Meanwhile, consumer prices for retail beef are still going up due to the inverse relationship with the above financial factors...the record high prices paid to producers are being "passed along" to the consumer.


"...higher corn costs—all higher costs—ultimately wend their way through the system and wind up in the retail price of the product..."  Burt Rutherford, Senior Editor, Beef Magazine

The DEVIL'S ANGELS

WARNING! A Smokey "self indulgent pontification!"
The USDA is a large, unwieldy, bureaucratic, political devil, but,"it's" local public servants can be down right Angels.

I frequently complain about and criticize the United States Department of Agriculture (USDA). It is a politicized, bureaucratic, and often serpentine mess. Yes, the Washington based political wonks that manage this behemoth are often nothing short of idiots. But, I would like for us to take a step back, look out the window, far beyond the carpet lined office, and tell you about the oft forgotten men and women who work for the various agencies and departments of the USDA.

You see, once upon a time, the USDA was not only a proponent of the farm, but a valued source for methodology, economics, and stewardship. The "County Agent" was a member of the community, valued for his or her knowledge, ready to provide advice and education on planting, water resource

management, production, conservation or any manner of innumerable subjects. In recent times, they
have faded from the conscious of many. The bureaucratic "red tape", political wheeling, and, to some degree, the USDA's loss of mission has cast a pall that sometimes casts a shadow on these agents. AND too often, they themselves are ignored or forgotten by "the parent".

I recently attended a major national event by the Grazing Lands Conservation Initiative (GLCI). The theme of the conference was "To heighten awareness of the economic and environmental effects of grazing lands". I went to this event with quite a bit of skepticism because the main sponsors were the various departments of the USDA and from the Department of the Interior (DOI). "Probably a grand propaganda event" I was thinking. Boy was I wrong!

The GLCI event was four action packed days of learning sessions, break out groups, and totally geared toward sustainable livestock management. Most of the speakers were the aforementioned "County Agents" and do they know "their stuff". I came away impressed with not only their scientific knowledge, but also with the depth of their "on the ground" experience. As the old saying goes: "they all had dirty fingernails". There was not a single policy or political wonk to be found. In fact, most of the attendees were equally divided between these government employees and individual ranchers like myself. Everyone, and I mean everyone, in attendance had one goal in mind, sustainability. (Ok, enough of the conference stuff...visit the GLCI site if you want to learn more.)

My real point is as follows. In getting our family ranch re-started I have pestered and cajoled my local USDA agents mercilessly. In every instance, they have responded professionally, timely, and courteously. In fact they have "bent over backwards" to help, provide assistance, or get the information I needed. Representatives of the NRCS, SRM, and ARS have not only provided information, but have personally visited the ranch to inspect and gather information...to help ME. These men and women have taken soil and water samples, surveyed and measured, and provided detailed recommendations. They then call regularly to see how things are going or if I have any new issues. Whenever we have had a success, they were right there celebrating with me and when things haven't gone as planned, they said "let me make some calls and I will get back to you with a possible solution"...and they did. For all of this I have paid...NOTHING!(if you don't count my income taxes):)

I thought I was just lucky that my county had some out of the ordinary USDA folks. The GLCI conference opened my eyes. I quickly learned that no matter where you are from, these "boots on the ground" professionals all have the same mission...to help and serve the individual

So, while I do not trust or respect the USDA as policy friendly toward the "little guy", I do trust my local County Agents. When it comes to actually caring about the success of the local farmer or rancher, these men and women are absolute ANGELS.

More Info:
"HOPE on the RANGE Video
By SRM (Society for Range Management)

Photos courtesy of NRCS
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