Competitive Commodity Insights

Commodity Insights

Competitive Commodity Insight: Ground Beef

A U.S. calf crop predicted to be the smallest in a half century has led to some dire predictions. Some insights on what the numbers really hold in store.

The beef cow herd is changing...will it change ground beef supplies?The final tally for the 2010 U.S. beef calf crop is expected to be at its lowest since 1950 and, worse still, it's expected to continue falling for the next three years. According to analysts, that means the supply of domestic cattle available to go into final beef production, the feedlots, won't start to increase until 2015; beef, until 2016. 

USDA believes that while turning beef cow inventories around this year from their ongoing decline could be possible, it is not likely, especially with beef replacement heifer numbers at their January 1, 2011, levels. Cow slaughter — with only a minor weather related
break — is continuing thus far in 2011 at rates only slightly below the ending rates of 2010. The implications of continued cow slaughter in the face of the reduced beef cow herd, along with the expectation that some 7 percent fewer beef heifers will calve in 2011 than in 2010, are for a further reduction in the national beef cow herd during 2011. A smaller cow herd and any future heifer retention for breeding would likely lead to exceedingly tight feeder cattle supplies, at least through 2012 and 2013.


Those extreme numbers have led some analysts to predict significant changes in the American beef sector. Cattle feedlots and packing plants that already can't buy enough animals to fill their capacity may be forced to shut down, even as retail beef prices rise on the heels of shortages. That could spell a longterm depression in demand for beef, which would dampen companies from returning to the market, even as supplies pick back up. One maverick analyst, Olathe, Kan., consultant Bill Helming, goes so far as to predict demand for ground beef, which can price competitively next to pork and poultry, will rise on the shortage of middle cuts, leading to a longterm shift in the beef market away from quality cuts and toward cattle finished specifically for the ground beef market.

Others disagree. Mark McCully, Director of Supply Development for Certified Angus Beef, says, "I've always believed and will continue to believe the American beef producer's global competitive advantage is in premium, grain-fed beef." Demand may temper for that high-quality beef, McCully believes, but it will not diminish significantly, especially as the world economy recovers. "Where else in the world do you have the combination of factors that add up to make high-quality beef more affordable? Every time the American farmer takes his eye off producing for high quality, we lose track of what made us successful."

His advice to grocers in the face of this market? Keep doing what you're doing. Highlight the inherent quality in beef, and look for opportunities to sell value of beef balanced against the cost competition of low end ground beef and poultry, and if the market does shift toward ground beef, capitalize on the upsell potential possible with premium ground beef.




Commodity Insights for May: Drought-pressured Beef Farmers

Continued expected drought in the Southern Plains threatens to make those already tight beef supplies even tighter.

The latest estimates for the final size of the 2010 U.S. crop of cattle available for slaughter puts supplies at their lowest point since 1950. Worse still, supplies are expected to continue falling for the next three years. Now, adding insult to injury, severe drought throughout the Southern Plains -- the source of 25 percent of the nation's cow slaughter today -- threatens to accelerate the drain on cattle supplies.

Analysts now expect the supply of cattle available to go into feedlots, the final phase of growth before harvest, won't start to increase until 2015; beef, until 2016.


Supported by the Nebraska Corn Board

The Nebraska Corn Board, on behalf of 23,000 corn farmers in Nebraska, invests in market development, research, promotion and education of corn and value-added products. The board aims to work closely with the farmer-to-consumer food chain, to educate everyone about the role corn has in our everyday healthy lives. The Nebraska Corn Board is proud to sponsor the Farmer Goes to Market program to help bring its mission of expanding demand and value of Nebraska corn to the consumer, through the strongest touch point in that chain: the Nebraska retail grocer.

Supported by the Nebraska Farm Bureau

The farm and ranch families represented by Nebraska Farm Bureau are proud sponsors of the Farmer Goes to Market program. We take great pride in supporting Nebraska's agricultural foundation. A key part of that effort is to make sure we produce safe and affordable food. This newsletter is an important part of our effort to connect the two most important parts of the food chain -- the farmer and the grocer -- with the goal of increasing consumer awareness and information about how their food is raised in Nebraska.

In patnership with the Nebraska Grocery Industry Association

The Nebraska Grocery Industry Association was formed in 1903 by a group of Omaha grocery store owners, wholesalers and vendors to allow them to promote independent food merchants and members of the food industry, and to promote education and cooperation among its membership. NGIA continues to represent grocery store owners and operators, along with wholesalers and vendors located throughout Nebraska, by promoting their success through proactive government relations, innovative solutions and quality services. NGIA offers efficient and economical programs. NGIA also lobbies on both a state and national level, ensuring that the voice of the food industry in Nebraska is heard by our representatives.