051107 “Traceability” Is Key to Global Beef Markets

Bozeman, MT - As the beef industry becomes more concentrated with fewer people involved, traceability becomes more essential to global markets, according to a Colorado meat scientist.

Dr. Gary Smith, meat science professor at Colorado State University in Fort Collins, Colo., has traveled to 63 countries and explored each country's agriculture industry, including cattle feeders, packing plants, merchandising operations and beef sales businesses. In his travels, Smith found the United States in unique in its cattle and beef industries in two ways.

“The United States' quality of cattle is among the best in the world,” he told producers during a teleconference conducted on Oct. 12 from Bozeman to 18 remote locations throughout Montana and one in Fargo, N.D. “And we feed grain - corn, wheat, barley and potato to our cattle - so we have the highest quality of feed in the world and prior to BSE, we had the highest quality of beef in the world.”

So why has the United States been missing the boat in the global beef markets? Traceability - the United States lacks adequate ability to source and age verify its cattle and beef, said Smith. “The United States is the only real developed country in the world with no traceability,” he said. “It's embarrassing.”

In his recent international travels, Smith toured a Japanese retail food store that had the ability for consumers to visualize the people responsible for producing the beef in individual packages using a numbered code found on the package and a kiosk. When the numbers were typed into the kiosk, it displayed pictures of the producers, location it was raised, dates of birth and other information.

The Japanese government verifies the information used in its traceability system, said Smith. “It is run by the national agricultural animal breeding center,” he explained. “It is government held, and run by government auditors who audit the information at the time the carcass is sold to verify its traceability.”

After learning of the Japanese's traceability system, Smith said it was embarrassing for him to have to explain how the United States determines age by looking into the cattle's mouths. “The United States is horribly behind,” he said.

The United States may have the best quality of beef and cattle in the world, but without traceability for verification, Smith said “they're not going to believe us.”

For the future, Smith said U.S. producers need to continue feeding grain to meet the market's demand for the high quality, grain-fed beef the United States can provide, and get a working traceability system. “Or it's going to hurt us in trading with Japan,” he added.

Since the United States has been shut out of Japan's beef trade, the U.S. beef industry has taken a hit on its variety meat market. Currently, a beef tongue sells for about 25 cents in the United States, when it could bring up to $1.40 in Japan, said Smith. “We need traceability or we're not going to be able to sell very many tongues,” he said.

International markets aren't the only ones demanding traceability. Three of the beef industry's largest domestic customers - Costco, McDonalds and Wal-Mart - are in the beginning stages of demanding source and age verification for the beef they purchase.

“They have the desire to inform their customers that they know where the beef came from and when the cattle were born, giving an impression of what the experiences were like,” said Smith. “It's a step. It's telling the customers that this is a business that sells food and beef and really cares.”

This type of traceability is going to force producers to be honest about how they handle their animals, said Smith. Producers shouldn't make a claim about their animal care and handling procedures, unless, those procedures can be validated by a third party, he advised, as the repercussions could be costly.

While the United States is painfully behind in traceability, its northern neighbor is not. Canada could steal some of the United States' global market share if the United States doesn't have some source- and age- verified cattle ready when Japan is ready to import American beef, said Smith.

“Canada will be there,” he said. “They're going to get us if we don't get some cattle lined up.”

The United States does have some cattle today that would fit the bill for Japanese and global trade. The auction market in Joplin, Mo., is leading the country in terms of technology and traceability beef sales with its source and age identification program, said Smith.

“When we get the door open (to Japanese markets), they'll be able to get the cattle there,” he said. “I think at the moment we get permission to get our beef back into Japanese markets, which will be sometime in mid-November, we need to have some beef on the water.”

Japan hasn't necessarily dug its heels into the ground when negotiating the resumption of beef trade with the United States, said Smith. Instead, Japan is treating the United States with the same amount of fairness the United States treated Japan in 2001 after its BSE case.

“In the original negotiations with Japan, every time we'd talk about what we could do to get our beef back into their country, they'd say tit for tat,” said Smith. “We excluded them from our beef markets in 2001, then they excluded us from their beef markets in 2003.”

Smith said he sees no problem with allowing Japanese beef into the United States, as Japan doesn't have a large amount of beef to export. During his travels, Smith said he toured one of the four Japanese packing plants. “You know its small when they lead the cattle in to slaughter with a rope halter,” he joked. “They are itty-bitty plants.”

While traceability will improve the United States' ability to re-enter the global beef markets, there are other ways for producers to capitalize on their cattle, said Smith.

Joining alliances and branding the product or differentiating the cattle from other cattle are three ways producers can capitalize on their cattle. “If you sell your calves at weaning, you can get better genetics, change your management or get affiliated with a partnership or feed a specific program” to differentiate your cattle from the rest, said Smith.

Another way to capitalize on cattle is to precondition the calves for better performance in the feedlot, Smith said he recommends producers follow the Value-Added Calf 45 program, where calves are preconditioned using vaccinations and a nutrition program of trace minerals and amino acids for 45 days prior to weaning. This program has averaged a $15 to $25 over cost return on 550-pound calves for producers, said Smith. “Calves that are sick (when they go) on feed grade lower and have tougher meat,” he added.

Natural, grass-fed and organic beef are other markets in which producers may capitalize if they can supply beef year-round to the markets. Producers can form an alliance or start their own businesses providing a branded beef product by backgrounding some livestock or getting some producers to calve off season to provide a year-round supply of the product, said Smith.

In addition, producers can work with packing plants nearest to their location to process their beef for half a shift or two hours, he said. The packing plants will segregate the cattle and clean the facilities if the producers have enough cattle for slaughter to make it feasible, because they'll run their own cattle for the rest of the day, said Smith, who is partners with Nolan Ryan in a niche beef business.

The natural beef market is growing 20 percent per year. “It's easier to grow at that rate if you start out with small numbers,” said Smith. “There is only one big packer, Natural Beef, that has its own natural beef program.”

Smith said the country's second largest packer was planning to announce its own natural beef program earlier this week.

“I'm a proponent of natural, grass-fed and organic beef, but that doesn't mean that conventionally-raised beef is any less safe, wholesome or healthy,” he added, “We need to grow whatever people are willing to buy.”

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