Can lean, finely textured beef (LFTB) make a comeback after this spring’s public relations nightmare? Analysts with Rabobank International believe it can, but it will take time and a concerted effort by industry to build consumer trust.
Rabobank’s Food and Agribusiness Research and Advisory group today released a report titled “LFTB: Beef’s latest battleground for survival,” which details the role of LFTB in the beef production chain and how its decline impacts markets. The group believes that as U.S. beef production and supplies continue to decline, the market cannot tolerate loss of the 2 percent of production LFTB represents, which is equivalent to one million head of cattle.
Don Close, vice president of the group’s animal protein division, says the company decided to take a second, objective look at LFTB after allowing time for the emotional public debate to subside. Even among industry proponents, he says, there is an overwhelming bias that the product is a lost cause, but the Rabobank analysis approaches the issue from a different perspective and suggests otherwise.
The crash in demand for LFTB cost just about everyone from cow-calf producers to consumers, the report’s authors note. Processors lost the value of a significant portion of each carcass, forcing them to drive the purchase price of finished cattle lower. Lower prices for finished cattle pressures calf and feeder-cattle lower. At the other end of the chain, retailers have to pay higher prices for ground beef, particularly that with a high percentage of lean. Consumers lost access to a safe, high-lean product that enhanced the lean percentage of ground beef at a low cost.
Between early March, when the media began covering LFTB, and May 30, fed-steer prices declined 7 percent, the beef cutout price declined 3 percent, the value of 50 percent lean trimmings declined 46 percent and the value of 33 percent lean beef trimmings (the type of product from which LFTB is produced) declined an astounding 88 percent. At the same, the value of 85 and 90 percent lean trimmings increased by 5 percent and 4 percent respectively. Ground beef prices overall increased by 26 percent.
The drop in prices for 33 and 50 percent lean trimmings caused packer margins to decline by $78.34 per head, a loss they passed along to cattle feeders.
So how can LFTB find its way back into the market after its reputation took such a severe beating? Rabobank analysts believe market forces will play a role as declining supplies drive beef prices higher, but they also say the industry needs to recreate the product. The effort should include upgrading the product, including replacing the ammonia gas used in processing with some other food-safety intervention such as citric acid treatments. Repackaging also would include renaming the product and a new regulatory approval process, supported by promotions and consumer education. The ingredient will need to be clearly included on product labels for transparency.