Industry History

Industry History and Background Economic Factors U.S. Imports and Exports Beef Price Cycles Beef Production in the U.S.

Intro to the Beef Industry

Industry History and Background

1400s 1500s 1600s 1700s 1800s Late 1800s

Cattle reachTexas, California

from Mexico

Cattle industryemerging in

Florida

Cattle reachNew England/

New York fromEngland,

Northern Europe

Cattle businessthriving; focused west

Family owned/managed

Produce 4-5 yr. oldgrass-fed steers;

shipped by live train

Chicago/Kansas City epicenter for sorting, distributing cattle via rail

Packers/processors also at rail centers Refrigerated rail cars

Invented by G.F. Swift Larger packers operated regional

shipping/distribution New York, Boston, Philadelphia

INDUSTRY HISTORY AND BACKGROUND

1800s

Federal Meat Grading System, 1920s Federal Interstate Highway System, 1950s

No longer dependent on railways From Carcass to Primal Cuts

Boxed Beef Led to vacuum packaging Led to block-ready, boneless, case-ready

beef

INDUSTRY HISTORY AND BACKGROUND

20th Century

Economic recession Beef demand falls

Cattle numbers drop to historic levels Cattle and beef prices reach record high levels

INDUSTRY HISTORY AND BACKGROUND

Early 20th Century

From producer-driven to consumer-driven Beef demand in rapid decline “War on Fat”, 1990

“Taste Fat” vs. “Waste Fat” Revived interest in quality which helped

rebuild demand

INDUSTRY HISTORY AND BACKGROUND

Late 20th Century

ECONOMIC FACTORS

Variables Impacting Beef’s Profitability

140,000+U.S. Farmers and

RanchersAverageherd size

42

92.6millioncattle

(Jan ‘11)Beef

production

26.3billion lbs.

Gross incomeof cattle

$45.3 billiontotal inventory value

$100 billion

$74 billionTotal consumer

expenditures

Economic Factors AffectingSupply and Demand

Top exportersof beef

Top US exportmarket

Top US beefsupplier

The U.S. has 8% of the world’s cattle and produces 21% of the world’s beef

The U.S. remains the largest importer of beef globally, buying 2.3 billion pounds in 2010 valued at $2.83 billion

80% of the beef imported into the U.S. comes from Canada, Australia and New Zealand; mainly lean grinding beef for fast food hamburgers

Imports

The U.S. was the #3 exporter of beef in 2010, behind Brazil (#1) and Australia (#2)

2010 exports were 2.3 billion pounds valued at $3.53 billion

The U.S. currently exports 10-11% of production

Top export markets include: Mexico, South Korea, Japan and Canada (~70% of total beef exports)

The U.S. exported beef to 146 countries in 2010

Exports

Typically peaks in spring and fall when middle meat demand is strongest and cattle supplies are lowest

Bulk of cows used for lean trimmings are marketed in the fall, resulting in lower prices

Tighter supply + grilling demand support prices in spring/summer

Best prices during colder winter months (cooking methods) Increase in price due to new steak cuts

(Flat Iron, Petite Tender, etc.)

Holiday celebrations and summer grilling increase demand and price

Higher prices in spring result of limited supply, especially for Choice

Similar to Chucks; peak during colder months Prices decline in summer due to increased supply +

decreased demand

Family owned/operated industry

U.S. Beef Production

80% in same family for 25+ years

10% in same family for 100+ years

Cattle raised in all 50 states Various cattle breed types and crossbred cattle

Adapt to various conditions

Seedstock Producer, grassland based “Purebred” segment Genetic base for breeding stock

Cow/Calf Producer, grassland based Combine genetic lines to best meet market demand

(crossbreeding) Sells to stocker or feedlots

Stocker Specialized segment Use grasslands as natural resource Sells to feedlots for grain-based finishing

Feedlot Use higher energy diets to achieve rapid gains to create the

world's highest quality beef products

U.S. BEEF PRODUCTION

At the Ranch

Harvest finishedcattle

Fabricatecarcasses intosubprimal cuts

Sort and “box”beef

Market topurveyors,processors

U.S. BEEF PRODUCTION

From Packer to Market to Table

Fabricate boxes ofsubprimal cuts

Sell to foodserviceoperators, retailers

Present productto consumer

Packers Purveyors/Processors

FoodserviceOperators/Retailers

Not more than “minimally processed” Label must explain “natural”

i.e., no added colorings or artificial ingredients

LABELING CLAIMS

Natural Beef

Cattle MUST: Be raised separately Have access to pasture, though many are feedlot finished Be fed 100% organically-grown feed (grains and forage) Be treated when sick

When treated with antibiotics, must be removed from program

Cattle MAY: Be provided certain vitamin and mineral supplements

Cattle MAY NOT: Be given antibiotics or enhancers for any reason

(or must be removed from program)

LABELING CLAIMS

Certified Organic

Prohibited: Synthetic pesticides on pastures Sewage sludge for fertilization of feedstuffs Irradiation on beef products

Producers must be certified through USDA’s Agricultural Marketing Service (AMS)

LABELING CLAIMS

Certified Organic

Feeding regimen for livestock raised on Grass, green or range pasture, forage Shall be 80% or more of the primary energy

source throughout animal’s life

LABELING CLAIMS

Grass-Finished Beef

Single most sustainable, renewable form of agriculture that produces an amazingly nutrient-dense source of protein

American beef industry dates back to 1500s Railroads, federal highways revolutionized industry Federal regulation began in 1920s Focus moved from producers to consumers in late 20th

century Tough to manage supply and demand for beef Industry is major contributor to U.S. economy U.S. a top importer and exporter of beef Beef cuts experience seasonal shifts in price/demand Specialty beef requires special labeling

Beef Industry Summary