Thursday, March 27, 1997

Helming has "good news" and "bad news" to tell ranchers

By J.T. SMITH

Farm Editor

FORT WORTH - Cattlemen here attending this week's 120th annual convention of the Texas and Southwestern Cattle Raisers Association were in the mood for some good news.

But noted economist Bill Helming gave them a mixed picture Tuesday.

"The good news is that the cattle market will be dramatically higher in 1997 - and even more so in 1998, 1999, and 2000 - than it was in 1996," Helming said. "I think we'll see about a 25 percent increase (in prices)."

But then ranchers started squirming in their seats as Helming paused.

"The bad news is that the decline in market share that we've seen since the mid-1970s will continue for at least the next seven years and will go from 32 percent in 1996 to no more than 26 percent in the year 2003," Helming lamented.

Chicken continues to take a big slice from the beef market share year after year.

Helming noted that 1970, the per capita meat consumption meat market share for beef was a whopping 44 percent, compared with 29 percent for pork and 25 percent for poultry.

But he forecasts that by the year 2003, beef and pork each will drop to 26 a percent share of the meat market, while poultry will continue its steady dominance of the meat market to 47 percent.

The worst of worlds

Even worse, Helming said, is that while the per capita consumption of beef has been declining, the price of beef at the consumer level - adjusted for inflation in real dollars - also has been going down.

"That's the worst of all possible worlds," Helming said.

Helming's news didn't get any better.

"The beef industry is on a collision course," Helming added. "It's a painful thing to 'fess up' to, but the beef industry has a beef-quality problem."

Helming said there's only one way to deal with that problem right now - and that's price.

"We have a pricing, marketing, grading and product identification system in the United States where cattle at the feedlot and the processing plant are all bringing the same price, even though the product we're selling is clearly not all the same," Helming said.

That's no way to do business, Helming noted.

"We're going to continue to dig ourselves a deeper hole if we don't change that paradigm and go to a truly value-added system where we reward the good and discount the bad."

Getting a uniform supply of beef

Helming said there are two essential factors required for a successful branded beef program in the United States today:

-- A relatively large volume of consistently and predictable high-quality and palatable beef for both whole muscle and ground beef products. This requires a much greater emphasis on selecting and using cattle that have the right beef cattle genetics.

-- A demand-pull marketing and merchandising system and strategy based on building customer brand loyalty and consumer preference for the branded and private label beef products on a repeat sale, purchase and consumption basis.

Helming said that cow-calf operators and/or cattle feeders control three dominant factors - beef cattle genetics, age of cattle at the time of slaughter and marbling - which reliably predict and impact beef product quality and palatability for the 25 million head of fed cattle marketed annually.