Dire predictions?

[alexfarms]

I'm posting an excerpt from Bill Helmings newsletter that I received earlier this week. He's been talking about how changes need to be made within the beef industry because of the increasing demand for hamburger and the decreasing demand for higher value cuts and I'm curious what all ideas for changes any of you have:

"If the U.S. beef industry does not change course and implement ways to reduce significantly the cost and price of beef to the average U.S. consumer in the years ahead, consumer beef demand, consumption and market share will continue to decline in the years ahead as will beef cattle inventory numbers. As I have extensively documented and written and talked about over the past five years, the consumer demand and consumption of ground beef is going north (the U.S. hamburger society) and the consumer demand and consumption of the higher priced beef middle meats is going south. At the same time, the consumption and market share for chicken continues to get better and better. If the U.S. beef industry does not implement ways to significantly reduce the cost of beef to the U.S. consumer starting soon, then within the next 40 to 50 years, the U.S. beef industry will not exist as it does today. Beef will end up then like the U.S. lamb and lobster industries are today, i.e. beef becoming a specialty and luxury product for relatively very few Americans and consumers. The U.S. beef industry's business model is broken."

 

[smnherf]

I don't know what to say about guys like this. Is he saying we are supposed to just work cheaper in order to produce cheaper meat and lower our standard of living , or is he saying that we need to subsidize the industry through govt intervention in either cheaper feed or should we increase the use of pharmacutical products to increase lean meat yield or is he just setting the stage for us to allow even more imports of cheap meat from south America? I hate it when pundits claim a big problem and then offer no solution to it.

I say let the markets function and set up an environment that allows people to expand their production and allow new people to enter the business. More taxes and more regulation isn't helping.

 

[alexfarms]

Well, I don't understand all he is saying either, but I have been reading his stuff for a while. He believes we need to change the way beef is marketed and the way it is produced. Currently, feedyards are at 62% of capacity because of a shortage of cattle. Packing plants are running at 88% of capacity. Beef is at record prices, not because of demand, but because of a shortage of cattle. Here's another excerpt: "Based on the Food Demand Survey conducted by Oklahoma State University (called the Willingness to Pay for all Meat Products or WTP), the WTP decreased in December of 2013 for all meat products except for hamburger (ground beef). This is consistent with what I have been writing and speaking about for the past several years. Bottom line, ground beef and chicken are typically more affordable for most consumers and families who typically have less income available to spend. This will be even more true over most of the next 25 years."

He has suggested the marketing system needs to be changed, because too many cattle are being fed for the production of high value beef, when they could be fed more cheaply for hamburger production.

 

[smnherf]

He has suggested the marketing system needs to be changed, because too many cattle are being fed for the production of high value beef, when they could be fed more cheaply for hamburger production.

There is a bigger picture than just the US though. We cant ignore the demand for grain fed beef outside the US, a market that we have a significant advantage over every other country in the world and something that we have invested a lot of money into. I have heard this cheap meat idea being promoted by our national organization in previous years too. It leads to market consolidation, low profits and an eventual shrinkage of the industry. The idea that we need to compete with chicken based on price is fools gold. If we compete on taste, then we win big time.

The market forces are determining how cattle are being fed right now to meet the world wide needs unless he thinks the packers are using their monopolistic market power to manipulate the market signals being sent to the producers. Just like the corn market, high prices are the cure for high prices as profitability eventually leads to more production.

 

[alexfarms]

A few other stats from his news letter:
The US cow herd has shrunk 36% from 1975 to 2014.
Beef consumption has declined from 94#/person to 55#/person from 75 to 2013 in the US.
US per capita Hamburger consumption has declined from 39# to 31# since 1975, while higher value cuts have declined 53# to 23#.

 

[glacierridge]

The cost of ground is up... People still eat beef.
I think shortage is the biggest thing.

People eat less beef in general not because of the cost... All protein is high... But because of health. People hear over and over that red meat is bad for them. They still eat it but less because they believe it's unhealthy in contrast to chicken and fish.

 

[djinwa]

Fascinating to me, in the "land of the free", few understand or want free markets.

So is he saying we have high priced cuts in the stores, and nobody buys them and they are thrown away?

I doubt it. If that were the case, wouldn't take many days for prices to drop or production to be stopped if there were no profits.

So if someone is buying them, end of story. Free markets say you charge as much as people are willing to pay.

I can think of all sorts of things that are supposedly overpriced, yet people keep buying. NFL tickets, for example. Will football go away? Should we eliminate the NFL, and just go with high school football that people can afford?

Don't know why we should care the total number of cattle in the country, as long as each producer is making a profit. In fact, the fewer producers, the more demand per unit produced, and the better each producer does. Can't think of many businesses that want more competitors so they have to drop prices so customers can afford it.

 

[TexasBred]

He// I said I was going to quit smoking if they ever got to $.50 a pack. Here I am.....$6.00 a pack. You can't eat but just so much chicken, pork, tofu and humus and then you want some BEEF in any form. :nod:

 

[cow pollinater]

Fascinating to me, in the "land of the free", few understand or want free markets.

So is he saying we have high priced cuts in the stores, and nobody buys them and they are thrown away?

I doubt it. If that were the case, wouldn't take many days for prices to drop or production to be stopped if there were no profits.

So if someone is buying them, end of story. Free markets say you charge as much as people are willing to pay.

I can think of all sorts of things that are supposedly overpriced, yet people keep buying. NFL tickets, for example. Will football go away? Should we eliminate the NFL, and just go with high school football that people can afford?

Don't know why we should care the total number of cattle in the country, as long as each producer is making a profit. In fact, the fewer producers, the more demand per unit produced, and the better each producer does. Can't think of many businesses that want more competitors so they have to drop prices so customers can afford it.

:nod:
I'll add that ground beef is NOT the product that we want driving the industry. If push came to shove we could grind the whole animal and watch the price of ground beef drop like a rock but then the good cuts would be worth their weight in gold. I'd rather have my cattle sell for what the good cuts are really worth and have expensive hamburger than have cheap hamburger.

 

[alexfarms]

Fascinating to me, in the "land of the free", few understand or want free markets.

So is he saying we have high priced cuts in the stores, and nobody buys them and they are thrown away?

I doubt it. If that were the case, wouldn't take many days for prices to drop or production to be stopped if there were no profits.

So if someone is buying them, end of story. Free markets say you charge as much as people are willing to pay.

I can think of all sorts of things that are supposedly overpriced, yet people keep buying. NFL tickets, for example. Will football go away? Should we eliminate the NFL, and just go with high school football that people can afford?

Don't know why we should care the total number of cattle in the country, as long as each producer is making a profit. In fact, the fewer producers, the more demand per unit produced, and the better each producer does. Can't think of many businesses that want more competitors so they have to drop prices so customers can afford it.

"In fact, the fewer producers, the more demand per unit produced, and the better each producer does."
I don't completely understand what Mr Helming is getting at. I do know that less production doesn't increase demand. Less production decreases supply and increases price and too much price increase will eventually lessen demand. The current economics in the beef industry is less supply is increasing prices. I don't think there is any signs of increased demand increasing current prices. In fact, when you consider that US per capita beef consumption has declined 41% since 1975, its pretty obvious that demand is decreasing. I don't think a thriving industry will be able to continue to decrease supply in order to increase profitability.

 

[alexfarms]

Fascinating to me, in the "land of the free", few understand or want free markets.

So is he saying we have high priced cuts in the stores, and nobody buys them and they are thrown away?

I doubt it. If that were the case, wouldn't take many days for prices to drop or production to be stopped if there were no profits.

So if someone is buying them, end of story. Free markets say you charge as much as people are willing to pay.

I can think of all sorts of things that are supposedly overpriced, yet people keep buying. NFL tickets, for example. Will football go away? Should we eliminate the NFL, and just go with high school football that people can afford?

Don't know why we should care the total number of cattle in the country, as long as each producer is making a profit. In fact, the fewer producers, the more demand per unit produced, and the better each producer does. Can't think of many businesses that want more competitors so they have to drop prices so customers can afford it.

:nod:
I'll add that ground beef is NOT the product that we want driving the industry. If push came to shove we could grind the whole animal and watch the price of ground beef drop like a rock but then the good cuts would be worth their weight in gold. I'd rather have my cattle sell for what the good cuts are really worth and have expensive hamburger than have cheap hamburger.

In 1975 slaughter cows were probably selling for 15 to 20 cents per pound and choice steers for in the 60 cent per pound area. Today slaughter cows are selling for 80 cents to $1 per pound and fats for $1.40. So, in 75 fats brought 3 to 4 times cows and today fats bring less than twice what weigh up cows bring. Hmmmmmm. So, is the market telling us the market for weigh ups in catching up with the market for fats?

 

[1982vett]

In the fall of 2011 I was more than one foot out the door. It's a business decision. If you don't make a reasonable margin on a product, you shut the business down. With the costs of everything disposable, prices of my product has to earn enough for me to keep the doors of my business open......cheaper beef (hamburger or whatever) is not the only answer......if it is, it is only going to lead to NO hamburger possible product being produced by me.

I do not make a living from the cows I run...but there is always going to have to be enough incentive for me to stay the course and continue producing anything at all.

 

[alexfarms]

In the fall of 2011 I was more than one foot out the door. It's a business decision. If you don't make a reasonable margin on a product, you shut the business down. With the costs of everything disposable, prices of my product has to earn enough for me to keep the doors of my business open......cheaper beef (hamburger or whatever) is not the only answer......if it is, it is only going to lead to NO hamburger possible product being produced by me.

I do not make a living from the cows I run...but there is always going to have to be enough incentive for me to stay the course and continue producing anything at all.

Well, there is cost if production. Cow maintenance costs. Ration choices.

 

[greybeard]

I don't see any shortage of vehicles lined up at MacDonalds or Burger King and don't see ant shortage of Burger Kings or MacDonalds either. Seems like there's one on every corner and I have not in my lifetime ever seen one go out of business.

I have to wonder, just how (or if) they figured in the last 6 years of recession, unemployment, and reduced income/discretionary spending in all that doom and gloom as well.

 

[alexfarms]

I don't see any shortage of vehicles lined up at MacDonalds or Burger King and don't see ant shortage of Burger Kings or MacDonalds either. Seems like there's one on every corner and I have not in my lifetime ever seen one go out of business.

I have to wonder, just how (or if) they figured in the last 6 years of recession, unemployment, and reduced income/discretionary spending in all that doom and gloom as well.

That's the hamburger market. Hamburger competes with other meats. In De ember 2013, hamburger was the most acceptable priced by consumers of any of the meats.

 

[greybeard]

I don't see any shortage of vehicles lined up at MacDonalds or Burger King and don't see ant shortage of Burger Kings or MacDonalds either. Seems like there's one on every corner and I have not in my lifetime ever seen one go out of business.

I have to wonder, just how (or if) they figured in the last 6 years of recession, unemployment, and reduced income/discretionary spending in all that doom and gloom as well.

That's the hamburger market. Hamburger competes with other meats. In De ember 2013, hamburger was the most acceptable priced by consumers of any of the meats.

I know that---I don't got to McDonalds, but I haven't seen any chicken fried steak commercials from MacDonalds.
You did say this didn't you?

US per capita Hamburger consumption has declined from 39# to 31# since 1975, while higher value cuts have declined 53# to 23#.

A decline is still a decline.

 

[tsonda4570]

In 1975 everything was cheaper, inflation has seen to this. IIRC we are increasing export more than enough to cover the decline in domesticate consumption so far. Not saying we cannot/should not make changes but for instance CAB fights hard to not be commotitized. Can't spell that apparently. Most everything I sell at my job that bought my cows is higher than the competition. Marketing and perception drive a lot of decisions. The last Angus Pravda* I read discussed how a serving of lean beef only had one more gram of fat than a chicken breast. Great selling point as one taste good and the other taste like whatever you put on it.


*checking to see who is awake and remembers the Cold War no slight to the Angus folks intended

 

[alexfarms]

In 1975 everything was cheaper, inflation has seen to this. IIRC we are increasing export more than enough to cover the decline in domesticate consumption so far. Not saying we cannot/should not make changes but for instance CAB fights hard to not be commotitized. Can't spell that apparently. Most everything I sell at my job that bought my cows is higher than the competition. Marketing and perception drive a lot of decisions. The last Angus Pravda* I read discussed how a serving of lean beef only had one more gram of fat than a chicken breast. Great selling point as one taste good and the other taste like whatever you put on it.


*checking to see who is awake and remembers the Cold War no slight to the Angus folks intended

You may be right. Its hard to come up with the number of pounds of beef produced in the US that includes only cattle born here, but it doesn't appear pounds of production have changed much in the 75 to 2014 time period. Even though the cow herd had declined by 36% from 1975 to 2014, production per cow has increased from about 640# to 880#, which is about 37%. Are the greater cop of the cows today paying for themselves? Too complicated to figure out tonight...but probably. Especially at current prices.

 

[Aaron]

I posted on Ranchers about this. McDonalds and the other fast food joints biggest seller is not the 'Big Porker' or the McChicken, its beef. Thick, greasy beef patties. If I remember right, McDonalds worldwide consumes 750 fat steers every minute of everyday.

Fascinating to me, in the "land of the free", few understand or want free markets.

So is he saying we have high priced cuts in the stores, and nobody buys them and they are thrown away?

I doubt it. If that were the case, wouldn't take many days for prices to drop or production to be stopped if there were no profits.

So if someone is buying them, end of story. Free markets say you charge as much as people are willing to pay.

I can think of all sorts of things that are supposedly overpriced, yet people keep buying. NFL tickets, for example. Will football go away? Should we eliminate the NFL, and just go with high school football that people can afford?

Don't know why we should care the total number of cattle in the country, as long as each producer is making a profit. In fact, the fewer producers, the more demand per unit produced, and the better each producer does. Can't think of many businesses that want more competitors so they have to drop prices so customers can afford it.

:nod:
I'll add that ground beef is NOT the product that we want driving the industry. If push came to shove we could grind the whole animal and watch the price of ground beef drop like a rock but then the good cuts would be worth their weight in gold. I'd rather have my cattle sell for what the good cuts are really worth and have expensive hamburger than have cheap hamburger.

I completely disagree. Ground beef is one of few products that is fast and people can actually cook with little talent or brains. Roasts aren't even on the radar anymore in majority of households and steaks are limited to the choice cuts. I can't remember where I heard it, but the estimate was the future of the beef carcass was the loin and the rest would be made into ground beef. I know when we get an 800 lb carcass processed these last few years, we have ordered no roasts whatsoever, only the best steaks, and grind everything else. Even extended family doesn't want the steaks. Just as much ground beef as their freezers can hold.

 

[Chevyman]

Really people? This really is not that difficult. I realize everyone is high on record prices and think that because you are in the beef business people should pay more. Especially when some buy really expensive donor cows.

Here is the bottom line, if beef gets too expensive people will eat alternatives. End of story regardless of your opinion. Point number 2, to produce this higher demand for burger high growth cattle on feed for 180 days ain't workin and won't. Start thinking along these lines and it will make sense .

Cheers