Marketing cattle on a cash basis direct to packers remains the most popular method. But that long-standing practice appears to be in decline. It is likely that sometime next year the number of cattle sold through forward contracts, formula pricing or marketing agreements-during one full month of trading-will exceed those sold via the cash method. Many cattlemen believe that to be a dubious achievement, while others claim it's just another indication that the cattle business is changing. Beef's decade-long quality movement has produced many changes, and the upheaval has been the source of controversy among many within our industry. More important, however, is whether those changes have helped create progress. Has the beef industry responded to the 1991 Beef Quality Audit, a landmark survey of your customers (packers, purveyors, retailers, restauranteurs and consumers) that detailed beef's defects and lack of overall quality? Are we producing better cattle more consistently? And, are the products we're offering consumers better meeting their needs for quality, consistency and convenience?

Consumers return to beef
If consumer demand is the barometer of improvement for beef producers, then certainly our industry has made progress in the past decade. Last year beef demand turned higher for the first time in two decades, and consumer spending for beef set a new record during the first half of 2000, indicating continued increase for overall beef demand.

According to the Beef Demand Index, which is calculated by independent economic and industry experts using USDA per capita beef consumption data and USDA Choice retail beef prices adjusted for inflation, beef demand has remained strong during the first half of 2000. Incorporating recently released preliminary second quarter data, beef demand during the first half of 2000 averaged 5.2 percent higher than demand during the first half of 1999. Based on current economic conditions and projected beef supply and retail prices during the second half of 2000, expectations are that beef demand will remain above 1999 levels through the rest of the year.

Cattle-Fax, a private market research firm, says the current state of beef demand correlates with several economic factors, primarily increased consumer spending and higher per capita consumption.

* Consumer spending for beef during the first half of 2000 totaled nearly $26.2 billion-up nearly $2 billion (or 8 percent) from one year ago, despite record beef production.

* Per capita beef consumption for the first half of 2000 increased 0.6 pounds (or 2 percent) compared to last year, to reach 35.1 pounds.

This is happening at a time when average retail fresh beef prices for the first half of 2000 are expected to be up 14 cents per pound (5 percent) compared with the first half of 1999. And, according to Randy Blach, Cattle-Fax chief operating officer, beef's share of total meat spending is expected to grow in 2000 for the first time in 20 years. Beef's share of consumer spending is expected to grow by about 0.5 percent to 40.3 percent and will be the largest share since 1997. Total beef spending in 2000 is expected to grow by more that $2.6 billion and total about $52 billion-making it record large and about $6.5 billion larger than 1997.

New products boost demand
Two years ago in Drovers annual "Report on Progress," Michigan State University animal scientist Harlan Ritchie stated, "We desperately need to update our retail and foodservice product offerings so we can better compete with other animal proteins." Since then, a wide variety of new, convenient beef products have hit supermarket meat cases, helping add value to all segments of the beef supply chain.

According to ACNielson/IRI data, sales for prepared beef items at supermarkets for the fresh meat case through June 2000 have grown more than 67 percent (or $47 million) vs. sales two years ago. Much of this gain is due to the growing number of new, convenient beef items such as the four new beef products recognized as winners of the checkoff-funded Best New Beef Products Awards 2000. Four prizes, totaling $250,000 were divided among the winners.

"The improvements in demand have been remarkable," Dr. Ritchie says. "We're selling more product at higher prices. That's almost utopia."

National Cattlemen's Beef Association (NCBA) chief executive officer Chuck Schroeder says, "Our business plan to address convenience and nutrition has made an impact on beef demand. It has also re-energized the entire industry to continue finding new, innovative ways to bring value not only to consumers, but to the men and women who work on America's cattle ranches and feedlots every day. Every new consumer dollar spent on beef increases the opportunities for beef producers."

Coordination's impact
The success of beef's new products may help all producers, but none more than those involved in alliances or coordinated beef production systems. Two years ago it was estimated that about 1 million cattle (or 4 percent) were produced through an alliance. Today industry analysts claim that figure is about 15 percent of total slaughter. And approximately 40 percent to 45 percent of all cattle slaughtered this year will be marketed through a forward contract, formula or grid pricing arrangement.

Those statistics suggest a major shift in philosophy among America's beef producers. For instance, many producers are seeking rewards from true value-based marketing. They're building herds with improved genetic selection tools and value-based market incentives.

"What we're seeing now is improvement that is going back to producers," says Mark Armentrout, president of AgInfoLink USA, an information services company. "Our industry has made significant improvements, but much of that improvement has taken place outside the ranch. But that's now changing."

One of the basic principles of Total Quality Management is that you can't improve what you don't measure. That was a problem when producers sold their calves straight off the cow. The only information a cow-calf producer had was a weaning weight or a sale weight. "That has no impact at all on the quality of the product," Mr. Armentrout says.

Today, through alliances and other programs, producers are gathering performance and carcass data on their calves. That information is giving ranchers the information they need to make meaningful selection and management decisions. The data also helps encourage producers to implement health and preconditioning programs.

"The data says that when cattle are sold on a carcass-merit basis, animal that have health problems do not achieve the carcass quality of their healthy peers," Mr. Armentrout says. "That suggests feedyards can benefit from buying healthy cattle and paying a premium for them. They'll recover that premium when the cattle are sold on a carcass-merit basis. We're seeing more feedyards understand this and step up to the plate and pay a premium."

An ongoing challenge
Beef's Quality Revolution has certainly made a dramatic impact on your industry over the past decade. And changes in just the past two years have significantly improved prospects for your long-term business success.

Today, the beef industry can boast about new and better products that are meeting the needs of modern consumers. And, overall, our cattle have shown improved performance on the ranch and in the feedyard. Producers are also better managers of their cattle, as quality assurance programs have helped reduce injection-site damage and other quality defects.

Beef's Quality Revolution, however, is far from complete. Two years of increasing demand does not mean the crisis is over. It just means we've made significant movement in the right direction. Unfortunately, there are still too many cattle produced without the end product in mind. But with the additional economic incentives expected as value-based marketing expands, fewer and fewer producers will be able to afford to ignore the quality movement.