Challenges and opportunities in specialized beef

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A variety of beef-production systems in the United States provides consumers with options to suit their preferences while also offering opportunities for beef producers to address specific demand niches. A new report from USDA’s Economic Research Service titled “Alternative Beef Production Systems: Issues and Implications” outlines these systems and the opportunities and challenges associated with each.

While the vast majority of U.S. beef comes from conventional production systems involving grain finishing and use of animal-health and performance-enhancing products, growing numbers of consumers prefer beef with claims for natural, organic, grass-finished or local production.

Some production systems can combine two or more of these attributes. For example, grass-finished beef could also be natural or organic and locally produced, as can grain-finished beef. Producers also sometimes “bundle” additional claims, such as those relating to animal welfare, environmental stewardship or healthfulness of beef.

USDA sets specific standards for “organic” and “grass-finished” beef, but other systems are more loosly defined.

The market for beef from alternative production systems remains small, at about 3 percent of the total beef market in the United States, but the segment has grown at about 20 percent per year over recent years.

Other key points in the report include:

  • While practices vary widely across specific beef production systems, most cattle are typically born and raised on range or pasture land for the majority of their lives.  Roughages are also necessary in feedlot rations to maintain healthy digestive systems in grain-fed cattle.
  • About 80 percent of U.S. beef comes from steers and heifers finished in feedyards. Most of the remaining “non-fed” beef comes from older cows and bulls. That beef tends to be lower quality and cannot grade Choice or Select due to lack of marbling and age of the cattle. Beef from dairy cows, which consume grain in their rations, can be higher in marbling but cannot receive higher USDA quality grades due to age.
  • Higher quality grass-finished beef comes from younger steers and heifers finished on high-quality forages under careful management and genetic selection. These cattle can reach Choice or Select grades.
  • One study found that, when fed to the same level of backfat thickness, there was no statistically significant difference in tenderness scores between beef from cattle fed grass and silage and those fed grain. Another study reported, however, that feeding grain to cattle reduced the length of the feeding period by 21 percent which generally lowers per-unit production costs.
  • Only about two-thirds of organic beef is grain-fed because of the high costs of organic feeds compared with conventionally grown feeds. One study found premiums for organic feeds were 57 percent above conventional feeds. In some years, organic grains may only carry premiums of 25 percent or so, but in other years were than 100 percent higher, helping account for the higher cost of organic beef.
  • One study found that conventional grain feeding was 52 percent more profitable than natural grain feeding and 5.6 times more profitable than organic grain feeding, due to production efficiencies, shorter feeding period and lower feed costs. Grain feeding was more profi table than grass feeding for both organic and natural production, and natural grass feeding was the least profitable technology by a wide margin, largely as a result of the small premiums associated with its products.
  • In one feedyard study, use of technologies such as implants and antibiotics resulted in efficiency gains of 17 percent in average daily gain (ADG) and 9 percent in weight-gain-to-feed ratios (G:F) from a single hormone implant. Further results indicated a 53-percent reduction in morbidity and a 27-percent reduction in mortality from mass treatment upon the arrival of cattle at the feedlot. These efficiency gains and other resulted in simulated cost advantages of conventionally produced cattle over others of $77 per head over non-implanted control groups and $349 per head over organically fed cattle. A 10-percent increase in the price of organic feed increased costs by $54 per head.
  • Consumers will pay premiums for beef from alternative production systems, although those premiums vary and researchers find what people say they will pay on a survey and what they actually will pay do not always match up. One study found consumers willing to pay a premium of $0.76 per pound for beef produced without hormones. Another found consumers in Oklahoma City, Tulsa, and Denver paid average premiums of $1.45 per pound for ground products and $5.87 per pound for steak products labeled as for attributes such as no antibiotics, no hormones or all natural. In a survey of companies that purchased and marketed naturally produced cattle, researchers found 84 percent of the companies were willing to pay a premium of $5.95 per hundredweight for products that qualified.
  • Grass-finished beef has a different flavor profile than grain finished. Some consumers prefer it and some do not. One study found 23 percent of U.S. consumers surveyed preferred Argentine grass-fed beef over U.S. grain-fed beef and were willing to pay a premium of $1.36 per pound for it. Another found consumers were willing to pay a premium of $3.44 per pound for grass-fed over grain-fed beef.
  • However, consumers discounted grass-fed beef based on flavor and sensory attributes by an average of $0.36 per pound in one study and $0.55 to $0.82 per pound in another. One found that 62 percent of U.S. consumers who preferred U.S. grain-fed beef over Australian grass-fed beef were willing to pay a premium of $1.61 per pound for domestic beef.
  • Cattle in grain-finished systems generate less greenhouse gas emissions than those on pasture, and efficiency gains in both dairy and beef production that have further reduced environmental impacts per unit of meat output.
  • More land is needed to produce a given quantity of grass-fed beef, or less beef production will occur per unit of land, than conventional beef because of the extended periods on pasture, meaning higher ownership costs per unit of beef produced.

View the full report from USDA/ERS.

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Dan Volker    
Lake Worth, Fl  |  April, 08, 2013 at 09:08 AM

This was a great article....the only thing missing was the WHY part of the Consumer Direction and growing trends toward grass fed organic, etc. Whether those in Cattle embrace the Consumer belief or not, the Perception is the Reality that you have to deal with...and the Consumer sees free range grass finished beef as having high natural Omega 3, and being healthier than Wild Salmon( no mercury in the beef). The Consumer is horrified by the idea of factory farms and rampant use of antibiotics--and the potential for this to change the resistance of bacterias creating "superbugs", and the effect of this in the overall ecosystem. Pretty much any health conscious Consumer thinks GMO and Monsanto are among the greatest evils in the Food industry today---and "pretending" there is anything the Cattle Associations can do to change this perception is a dangerous delusion. My point being, embrace the clear direction for the health oriented consumer--the Niche Market, if your Farm has a good shot at this Niche. This is a future trend that can only get stronger.

Texas  |  April, 08, 2013 at 12:57 PM

Or the consumer will begin to realize that folr the world to feed itself we need to focus on efficiencies and science rather than sentiment and illusion.

SD  |  April, 08, 2013 at 09:26 PM

A consumer myself, I would be very angry if a business and an industry from whom I was buying a product, knowing I was ignorant of facts about the product they were selling me, allowed me to continue that belief without an attempt to correct my mistake! That would extend to the 'moral foods' groups and even the 'natural foods' promoters, when they are selling their products, verifiably little different than 'conventionally produced' food produced by others, at exhorbitant prices over the conventional products. Why can't you let there be variety in the market place for food? Essentially it is all very similar in nutrients, tho some 'hand grown' foods may have an edge on freshness or flavor. There are choices for all levels of income, and most 'moral foods' customers. Be thankful for that! Be thankful that you have the means to accomodate your PREFERENCES, and others of lesser means still have access to healtful foods, too.

OK  |  April, 09, 2013 at 09:00 AM

Let's all jump on the niche market bandwagon and we will all get filthy rich together! No longer any need for organized markets. No longer any use for bonded dealers. Surely we can do all cash business or take title to SUVs, boats, condos as security. This approach will certainly be the cash flood that raises all our yachts. I've got the beef. Where's the yuppie customers (the one's with more money than brains are mine - I call dibs!)?

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