040122 Complexity Defines Beef Industry

The nation's $70 billion-a-year beef industry is trying to satisfy price-conscious consumers, while addressing the sector's growing health concerns and remaining profitable.

It's not an easy juggling act.

Tom Field, a professor of animal science at Colorado State University, said meat lovers take the industry -- which literally puts food on the table -- for granted.

"We've been locked into a Norman Rockwell view of American farming since 1955," Field said. "In reality, the industry is highly complex. It has one of the most amazing production and distribution systems ever created. It's not a perfect industry, but it's an industry that's endeavoring to find solutions."

Colorado livestock sales are projected to be $3.14 billion in 2003. The number represents 65% of the state's 4.7 billion agricultural sector.

Regulation drives industry

The discovery of mad cow disease -- or bovine spongiform encephalopathy -- in a Holstein in Washington state last month focused attention on how much the industry has changed over the last decade.

When mad cow disease hit Europe in the early 1990s, the agricultural industry collaborated with the U.S. Department of Agriculture to build safeguards to keep the country's food supply safe.

Indeed, many beef-industry experts say the quick response from industry and government agencies to the potential public-relations crisis speaks volumes about how well the system works.

Earlier this month, federal officials announced new regulations meant to address mad cow disease.

The changes require cattle that have been tested for the disease to stay out of the food supply until test results are confirmed. Other changes will prevent meat from being accidentally contaminated with brain or spinal cord tissue that can spread mad cow disease.

Industry goes high-tech

Some high-tech applications in agriculture also are receiving attention in light of the mad cow scare.

Optibrand Ltd. LLC, a Fort Collins-based company that traces the history of cattle, recently signed a five-year contract with Greeley-based Swift & Co., the nation's third-largest beef supplier.

Optibrand designed a camera and software that reads the retinas in cows' eyes to rapidly identify sick animals. The new system will give Swift the ability to trace boxed beef back through the entire production process.

Warren Mirtsching, vice president of food safety and quality assurance for Swift, said the system provides "a platform on which all U.S. livestock traceability systems can be built."

But Jim Herlihy, a Swift spokesman, said standardizing traceability throughout the industry is a concept that's still years away.

The biggest obstacle: Despite the fact there are only five main players in the beef industry, about 50,000 ranchers serve those players, Herlihy said.

The industry's move to high-tech tracking systems could have consequences for consumers, Field said.

"We're used to a cheap food supply," he said. "Do we want a more high-tech approach that could potentially increase the cost of what we consume?"

Consolidation plays a role

The potential downside to the growing use of technology in the livestock industry is consolidation, Field said.

"As we move toward high tech, we have a tendency to create consolidation -- the big get bigger -- take a look at Wal-Mart," he said.

Steve Gabel, owner of Magnum Feedyard in Wiggins, said the four biggest players in the industry -- Swift, Excel Corp., Tyson Beef and National Beef -- control 82% of the market.

In the future, Field said more farmers will ally with each other to create big supply chains where they "act big" through cooperative ventures.

"I always tell my students, big is not necessarily bad. It depends on how the organization reacts," Field said.

While identification technology is expensive, Gabel said the added production expenses would allow ranchers to improve production efficiencies.

Such technology also can improve consumer confidence about the safety of beef both here and abroad.

While Swift planned to implement the Optibrand system months before the mad cow scare, Herlihy hopes the deal will reassure Japan -- its biggest market -- that Swift's product is safe.

The mad cow scare resulted in more than 30 countries placing a ban on American beef. The fallout from the scare hit the industry immediately.

Last week, Swift announced it would cut 270 of its 17,000 positions nationwide. The Greeley-based company said jobs would be added again once other countries lift their bans on U.S. beef. Herlihy estimates exports account for 25% of Swift's business.

Citing the bans, meatpacking giant Cargill Inc. also cut 700 jobs in Colorado, Kansas, Nebraska and Texas.

Despite the retreat from foreign markets, there are few signs that Americans are curbing their appetite for beef.

Ken Matthews, an agricultural economist with the USDA's Economic Research Service, recently noted choice steers cost about $92 per 100 pounds, compared with about $72 the same time last year.

Spurred by the popularity of the low-carbohydrate, high-protein Atkins diet, beef prices hit record highs a couple of months ago.

In November, live cattle traded at more than $1.02 a pound, compared with a few years ago, when prices were in the 50-cent range.

Field said advances in genetic science will continue to make the industry more efficient. Ranchers can develop databases with information on various traits, then use high-powered statistics to calculate the genetic differences.

While technology exists that would allow the embryos of prize cows to be supplanted in surrogates, Field said the price of such technology is too expensive to make economic sense for most breeders.

Natural vs. 'commodity'

Another controversial practice in the industry is the use of growth hormones in all livestock.

"The controversy is pretty slight," Gabel said. "We're taking something that's already in the animal and enhancing it. It's pure science and perfectly safe."

Consumers who are concerned about the safety of meat can choose natural meat products, which are more expensive to produce.

Charlie Moore, vice president of sales and marketing and part owner of Denver-based Maverick Ranch, said his company is trying to target consumers who are uncomfortable with conventional beef practices.

"There's a growing segment in the medical community that believes that antibiotic resistance in humans is due to the use of antibiotics in cattle feed," he said.

Moore also cited studies that show teenage girls are reaching puberty three to five years earlier than they did in the early 1900s.

"Some believe it could be because of the use of growth hormones in cattle and chicken," Moore said, although he did not cite any specific studies.

The movement toward natural beef seems to be gaining momentum. Good Times Burgers and Custard, a fast-food chain based in Denver, recently aligned itself with Colorado-based Coleman Natural Meats.

Last year, McDonalds announced plans to phase out meat containing antibiotics by the end of this year.

The verdict is out as to whether the fast-food chains' strategies will resonate with customers.

Bill Hammerich, CEO of the Colorado Livestock Association, said the differences between "commodity meat" and all-natural meat are relative.

"The science (for growth hormones) has been tested for years and years," he said. "There's nothing to suggest it's harmful to health. Some people may prefer the taste of all-natural beef, but it gets down to consumer choice."

Field said studies have shown there's no nutritional difference between the two.

"If an organic product better suits your needs, desires and value system, go for it," he said. "The reality is in the marketplace. Some people want food that is produced with minimal technology and minimal scientific protocols. Others want their food produced as safely and as cheaply as possible."

Source: The Coloradian Newspaper (Colorado)

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