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Consumers and Beef
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Beef Industry Challenges and ACCU-TRAC®
Electronic Cattle
Management
Consumers and Beef
The United States beef industry and export
market has suffered a blow with the news of a BSE positive
cow identified in Washington in December 2003. This has caused
the public and government health officials to place more attention
on beef safety, consistency and traceability. Beef consumers
have expressed concern about the safety and wholesomeness
of beef as well as consistency and quality issues. Consumers
continue to look at beef’s protein competition, pork
and poultry, as meal alternatives. Pork and especially poultry
have become the beneficiaries of this situation. While the
U.S. food supply, beef included, remains the safest in the
world, new production and traceability processes can even
further protect the food supply. These production and traceability
processes can be implemented with the ACCU-TRAC® Electronic
Cattle Management System, which can restore public confidence
in beef and gain market share from competing protein sources
such as poultry.
Comparison with Poultry
An analogy can be made to help explain the
differences between the structures of the beef and poultry
industries. Poultry production resembles more of a factory
churning out a uniform product almost based on the interchangeable
parts philosophy of production. But beef more closely resembles
a cottage industry composed of many independent craftsmen
producing different products based on their own personal preferences
or differing niche markets. The poultry model has resulted
in greater success with the protein-consuming public. Public
perception of poultry products is that they are safer, healthier,
and more consistent and predictable than beef products.
The success of poultry with the public is
due primarily to the advantages in the poultry production
chain. The poultry model employs more industry-wide integration
and coordination of production targets, shares more information
up and down the production chain, enjoys great genetic uniformity,
and has consistent and controllable production environments.
Producing a chicken breast is more like factory mold production.
Traditional Beef Production
Beef Cattle
The traditional beef production chain is
different from poultry in many ways. The nature of cattle
presents an entirely different set of circumstances resulting
in many challenges in producing a desirable food product for
the consuming public. One very important challenge is that
cattle cannot be raised indoors as chickens can. Cattle must
be raised in the outdoors in an open, range environment. And
with varying geo-climatic regions throughout the United States,
this means that different types and breeds of cattle are more
suitable to different regions of the country. Different cattle
fit different environments better. For example, a rancher
in a hot climate such as south Texas or Florida may feel like
Brahman cattle would perform better in this environment. A
rancher in a colder climate like North Dakota may feel like
Angus or Hereford cattle may perform better there. But although
some breeds have a reputation for possessing certain traits
and characteristic on the whole more than another breed, there
is actually just as much diversity within any particular breed
as there is between breeds. To complicate the genetics scene
even further, many beef producers mix different breeds within
their herds in an attempt to obtain a certain mixture of characteristics
overall throughout their herds. Therefore, the U.S. beef cattle
population has an incredible amount of diversity on many levels
including breed, genetics, management practices, calving seasons,
etc.
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The Beef Production Chain
Historically, beef has had a very segmented
production chain plagued with adversarial relationships, no
coordinated production guidelines, no clear consumer-based
end-targets in mind, ineffective market signals from segment
to segment that truly reflect consumer desires, and no data
flow up and down the chain to let members involved in the
various stages of beef production know the effect of their
management practices on the next segment or on the final beef
product. Beef has not enjoyed uniform genetics, controllable
ranching environments, integration, meaningful performance
information, or consumer-oriented production targets. Beef
has been a commodity product with little predictability.
The beef production chain is composed of
four major segments with some sub- segments. The four major
segments are producers, feeders, processors, and retailers.
The basic function of the producer is to produce the raw product,
in this case cattle. The feeder grows those cattle by putting
weight on them until they are ready to be slaughtered. The
processor serves as a disassembly operation and extracts the
usable components from the animal. Finally, the retailer markets
those usable components.
Within the producer segment is the seedstock
producer, the cow/calf producer, and the stocker/grower. The
seedstock producer produces purebred cattle (meaning cattle
purely of one single breed only) mainly to sell to others
who wish to use that breed’s genetic influence in their
herd. The commercial cow/calf operator produces a “crop”
of calves from his bulls and cows every year which he sells
for so many cents per pound. He often uses or produces cross-bred
cattle to obtain a certain mixture of character- istics desirable
to his geo-climatic environment and/or marketing situation.
The cow/calf operator may sell his calf crop as stocker cattle,
feeder cattle, or he may retain ownership of his cattle during
the feeding phase of production and then sell them directly
to the meat packer. The stocker/grower usually buys a set
of calves from someone else and puts them out to graze in
a pasture or perhaps on a crop in order to put some additional
pounds on those calves cheaply thereby increasing their weight
and selling them at a profit. Some stocker/growers will place
their calves in a growing program in a small feedyard rather
than out on grass. On the whole, producers do not receive
information on the performance of their cattle once they leave
their operation to know whether or not they have employed
effective genetic programs, health programs, or other management
practices. He is therefore hindered in his efforts to produce
a more desirable product for the final consumer or in his
efforts to maximize the profitability of his cattle.
The term cattle feeder is used to describe
either the owner of the cattle in the feedlot or the feedlot
operator himself. Sometimes the feedlot operator owns cattle
in the feedlot as well. The feedyard takes either calves or
yearling cattle and feeds them a high-energy ration for a
set amount of time while also monitoring their health condition
until they are deemed to be ready for shipment to the packing
plant and slaughtered. This is the last stage of live animal
production in the beef producing process. In the feedyard,
cattle are divided into ownership groups, not into groups
of like-performing cattle, and a whole group is on feed the
same number of days (140-150 days is typical for yearlings)
despite the different types of cattle in that group or the
varying performance of cattle within that group. These are
large-scale operations with several thousand head of cattle
on feed in a feedyard at any one time. Like the producer,
the cattle feeder is hampered in his efforts to produce better
beef or to maximize his profitability because of the huge
amount of diversity that exists within the cattle population
in his feedyard, the lack of information telling him how his
cattle will perform or how they did perform at the packing
plant, and the mindset that cattle are a commodity to be managed
broadly in groups with methods calculated only on averages.
The processor serves as a disassembler of
the cattle he receives. He may sell whole carcasses or halves
of carcasses to a wholesaler, but typically he sells boxes
of different types of beef products either to a wholesaler
or directly to a retail customer. The packer does not usually
know what his inventory will be until after the cattle for
that day are slaughtered and the carcasses are chilled for
approximately forty-eight hours and then weighed and given
a quality grade (to determine the amount of marbling or internal
fat in the ribeye) and given a yield grade (to determine the
amount of saleable red meat that carcass will actually yield).
When the packer finally knows what his inventory truly is,
then he can begin marketing his beef products.
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Finally, the retailer markets the different
beef products. But the grocery store retailer rarely receives
100% of the specifications he desires. Often, this is the
case for the restaurateur as well. For example, if the retailer
orders 100 boxes of 12 inch ribeyes to be delivered next week,
he may only receive a certain percentage that are actually
12 inch ribeyes while the rest of them are a mixture of 10
inch and 14 inch ribeyes. This is usually because the retailer’s
supplier cannot always guarantee supply because he rarely
knows what inventory he is going to get from week to week.
Therefore, the retailer has an inconsistent offering for his
customers which affects their confidence in beef. Also, if
the beef products do not sell in a timely way, then he must
either grind them up into hamburger or put them on sale. Either
way, the retailer does not receive full value for the products
sold.
In summary, a diverse set of conditions and
management challenges exists in each segment of the beef production
chain. This diversity includes environments, genetics, breeds,
breeding seasons and programs, health and nutrition programs,
identification means, information collected, information shared,
management practices, marketing methods, unpredictable inventories,
inconsistent products, etc. This diversity is exacerbated
by the lack of coordination or cooperation between these segments.
Traditional Feedyard Management and
the Marketing of Finished Cattle
There are approximately 25 million head of
beef cattle slaughtered every year. Beef production from these
cattle is managed by 860,000 producers, 400 sizable feedyards,
3 major beef packing companies, and a few dozen retail chains
of size. A critical bottleneck exists in the feedyard/packer
interchange in terms of information flow, market signals,
and cooperation. This interchange offers the most immediate
opportunity for profit enhancement and effective change on
a large scale since all those 25 million head of cattle pass
through a relatively small number of hands at this stage of
the beef supply chain.
Typically, the average feedyard manager thinks
of his operation as a kind of bed and breakfast for cattle.
He provides accommodations for the feeder’s cattle (pens)
and he feeds them a high-energy diet every day designed to
put weight on the cattle efficiently. He determines how long
those cattle will remain on feed and when they will be sold
to the packer. He negotiates the price and sale of those cattle.
His primary sources of revenue are the feed, medicine, and
yardage fees billed to the cattle owner.
In determining how long to feed the cattle
and when to market them, the feedyard manager subjectively
evaluates an entire pen of cattle at a time. When a group
or “lot” of cattle first arrive at the feedyard,
the manager goes out to their pen and looks at or “eyeballs”
those cattle and makes a guess at how long he should feed
them. For example, a set of steers that come in weighing 600
pounds may be fed 150 days. 800 pounders might only be fed
120 days. Calves might be on feed for 180 or 200 days. As
the estimated sale date approaches, the manager eyeballs that
pen again and decides if that pen might need to be fed 10,
20, or 30 days longer or maybe they should be put on the “show
list” now for the packer buyer to go ahead and look
at.
When it is time to sell those cattle, the
buyer from the packing company will eyeball those cattle as
well and he will negotiate with the manager for the price.
Usually, the buyer will see cattle in any one pen that are
not ready to be sold and need to fed longer, some that are
about ready for slaughter, and some that are already too fat.
So he arrives at an average price for the whole pen of cattle
because the entire pen will be sold together. He does not
have the option of picking and choosing cattle from within
the pen and then passing on the remainder of the pen. He must
take them all. Therefore, he offers only an average price
rather than any kind of premium because of the undesirable
diversity within the pen. The price is expressed as either
$/cwt (dollars per hundred weight or per hundred pounds that
animal weighs) or as cents per pound. This type of marketing
method and sale is commonly referred to as selling cattle
“live” or selling cattle on the “cash”
market.
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However, there is another marketing method
that is becoming more prevalent all time. It is known as “value-based
marketing”, or selling on a “grid” or on
a “formula”. As the consuming public expresses
the type of beef product it desires through purchasing habits,
these signals are transmitted back upstream from the retailer
to the packer and on to the feedyard. The packer expresses
the type of carcass characteristics he desires to the feedyard
through a marketing formula that offers incentives for hitting
their targets as well as penalties if those targets are missed.
For example, rather than offering $65.70/cwt for a pen of
cattle, a base price may be negotiated and then each individual
animal will be evaluated and rewarded or penalized depending
on its own individual carcass performance. For example, the
packer may be willing to pay a premium for carcasses that
weigh between 550 and 950 pounds, score a Yield Grade 3 or
better, and are graded as Choice or higher. For the carcasses
that do not fall within these parameters or this grid, then
they will be penalized with “discounts”.
Therefore, feedyards need a means of managing
individual cattle to specific economic end-points and a means
of inventory classification in order to take advantage of
the premiums and avoid the discounts. Such a means also needs
to be practical for the myriad of cattle management variables
and operational and logistical considerations. Ranchers also
need a means of recovering matched live and carcass data on
an individual basis to begin the herd improvement process
whether that is genetic or other management changes. In addition,
packers need to identify inventory more quickly, either by
identifying that inventory prior to slaughter or as soon as
possible thereafter. Packers need an efficient means of data
collection and feedback to upstream suppliers. Retailers need
a predictable supply of beef products that meet their specifications,
and they need it in volume. All segments of the industry need
an information system and systems network to coordinate production
efforts toward common, consumer-oriented goals. And finally,
the consuming public wants a higher-quality, more consistent,
tender, flavorful, and wholesome beef eating experience every
time.
The ACCU-TRAC® Electronic Cattle
Management System
Years of theory and speculation about how
the beef industry can compete with pork and poultry and please
the beef consuming public through individual value-based marketing
have led to little real progress in the practical world members
of the beef production chain live in. Until now.
The cutting-edge ACCU-TRAC® Electronic
Cattle Management System (ECM) and its various components
are in use in commercial feedyards, ranches, and packing plants.
This technology is allowing integrated beef production with
individual animal tracking and management from birth to box.
It does so cost-effectively, solving the problems associated
with ineffective group management done on averages. ECM®
helps beef move away from counter-productive commodity production
and into the increasingly growing and profitable value-based
production approach.
ECM® adds value by increasing uniformity
and consistency on both a live animal and carcass basis with
management toward a specific, objective end target. Producers
can improve their genetics, feeders can optimize net return,
packing plants run more smoothly with a more consistent throughput,
and retailers supply consumers with better beef. The ACCU-TRAC®
Electronic Cattle Management System is the answer to today’s
beef industry challenges.
What is ACCU-TRAC®? | The
ACCU-TRAC® Process | Benefits
|
Systems Users & Comments
| Consumers and Beef
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