Doing more with less. In the cattle business, that’s more than a nice idea; it’s the new survival plan.
“In any manufacturing system, if the number of units is reduced, the revenue per unit must increase,” said Pete Anderson, director of research for Midwest PMS, a U.S. livestock feed company.“The cattle industry must focus on maximizing revenue from each animal produced.”
Larger carcasses? Certainly, he said, but also increasing the value of each pound sold.
Anderson presented his paper, “External Influences on North American Beef Production: How Will the Cattle Feeding Industry Adapt?” as part of the Plains Nutrition Conference in San Antonio, Texas, last month. The full paper is available at here.
“Premium carcasses like CAB [Certified Angus Beef] or Prime used to be a happy accident that occurred at the outer end of the population distribution, just because there were millions of cattle fed,” he said.
Packers “creamed the coolers” to find quality they could sell for a higher value, but today real-world examples show ranchers reaching 50 percent Certified Angus Beef (CAB) brand and Prime on large numbers of cattle, with better than average feedlot performance.
“Economic signals are telling us that we need to do more of that,” Anderson said: even with a spike in grading, the Choice-Select spread remains relatively strong and premiums for CAB increasing.
“While U.S. per capita consumption has declined with supply, increasing prices are as sign of solid demand; a growing population will continue to consume beef,” he said, but the opportunities aren’t limited to domestic growth.
Exports accounted for $307 per head in 2013, according to the U.S. Meat Export Federation. By 2030, North America and Europe will have just 18 percent of the world's middle class population, compared to 63 percent in the Asian Pacific.
“North America should get in, stay in and dominate the premium beef market,” Anderson said. “Our resources are best utilized creating big, high-quality cattle that produce an enjoyable eating experience and maximize revenue per animal.”
The cattle that fit that description will only get more valuable, he predicted.
“We will not manage $2,000 cattle the same way that we used to manage $900 cattle,” Anderson noted. “While in the past, cost of production was the primary focus, emphasis will shift toward growing revenue.”