Food for thought on beef scare
Fearful this fall’s near-record cattle prices – around $110 per hundredweight at their peak in October – wouldn’t last, rancher Mike Hunter stuck to an aggressive marketing plan. He routinely sent fat cattle to market as they reached optimum weight, instead of betting, like some other producers, that they might fetch more money in a week or two. Heavily invested in the cattle business, he is well schooled in the industry’s cyclical nature and the sudden market changes that can leave a producer financially devastated.
“A lot of people didn’t capitalize on those high prices,” says Hunter, who maintains a herd of 350 cows on a farm near Chariton and buys an additional 150 to 200 feeder calves. Still, he’s got 60 head that will be ready to sell in the next 45 days, and cattle futures prices on the Chicago Mercantile Exchange had already dropped 16 percent (as of Wednesday) as the market adjusts to news of the first U.S. case of bovine spongiform encephalopathy, nicknamed mad cow disease because of the effects of the degenerative, fatal disease on the central nervous systems of adult cattle.
“That’s the only group I’m at serious risk on,” Hunter says of his nearly finished group of feeders, “and hopefully the emotion will get quashed out before then.”
Hunter’s sentiment is almost universal among beef cattle producers, who fear around-the-clock media coverage of the mad cow story will deliver the second blow of the one-two punch that came with the Dec. 23 news that a BSE-infected cow had been slaughtered in Washington state. He’s certain the “emotional ride” could hurt the industry, at least in the short term, and says it’s the media’s job to report the story responsibly, without hysteria. He offers a litany of facts:
BSE infections are localized in a cow’s nervous tissue, which isn’t found in muscle meats like steaks, roasts or ground beef. The dairy cow in question came from a Canadian herd and was born before cattle feeds containing bovine parts and byproducts were banned. Eighty-five percent of the U.S. beef supply is from cattle younger than 2 years of age, and the infected cow was 6 1/2 years old. U.S. Department of Agriculture officials have confirmed that the central nervous system tissue from the infected cow never entered the human food chain, but rather was rendered for non-human food uses, and the U.S. Food and Drug Administration announced last week that it has “under control” all the rendered product from the animal in question. The USDA also has recalled meat from 20 animals, including the infected cow, slaughtered at the Washington processing facility on Dec. 9 that made its way to distributors in Alaska, California, Hawaii, Idaho, Montana, Nevada, Oregon, Washington and Guam. A nationwide identification program, which will make it possible to determine where an animal was every day of its life, was already in the works, but likely will be put into place more quickly.
“The facts are, the disease is not carried in the meat supply,” Hunter says. “The meat supply is safe.”
He’s part of a fledgling marketing cooperative called Chariton Valley Beef, whose purpose is identify value-added opportunities for producers in an 18-county cattle-producing region of Southern Iowa. The cooperative, a partnership between beef producers, Iowa State University Extension and industry groups, stands to get a boost from the BSE scare as wary consumers want the increased confidence that comes from buying meat from local sources. The Southern Iowa group already is selling beef to niche retailers such as the One Stop Meat Shop in Des Moines’ new Metro Market, which saw a sales surge the weekend after the diseased cow was discovered in the Northwest.
“We know exactly where everything came from,” says Hunter, one of the cooperative’s organizers. “We haven’t tried to sell that aspect, but that’s what’s been [the case] all along. We know where [each animal] was produced and what it was fed and that certain standards have been followed.”
The fewer the people involved in the food production chain, he says, the greater the confidence among consumers that meat is safe.
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That’s something customers at Amend Packing Co., Des Moines’ last remaining slaughterhouse and an institution in the city since 1869, have come to trust. Fourth-generation owners Kent and Amy Amend Wiese are capitalizing on a burgeoning market as food-safety issues become part of the American psyche. Amend Packing’s small customer base includes niche producers such as Rosmann Family Farms of Harlan, which produces only organic beef; wholesale buyers such as B&B Grocery Meat and Deli on Des Moines’ Southeast Side and Fareway Stores, both of which supply cut-to-order meat; and local beef producers, many of whose families have been supplying beef to the slaughterhouse for almost a century. “I’m doing business with young producers whose fathers and grandfathers did business with my wife’s father and grandfather,” Kent Wiese says.
He’s developed a unique marketing niche that spreads the wealth with his loyal customers. It’s a matchmaking service of sorts, and Wiese links producers who want a fair market price and consumers who want meat from locally produced or specially fed animals. Often, but not always, Amend Packing gets the processing business.
“People have, in the last five years or so, wanted to know who raised it, how it was fed and whether it was given any growth hormones or steroids,” Wiese says, sounding a familiar refrain. “Instead of me buying it and reselling it, I tell people about producers within a 30-mile radius who can help them if they’re looking for Angus, Hereford or whatever kind of beef.”
Wiese’s word-of-mouth marketing approach adds a dimension of consumer confidence larger operations can’t muster. “It’s not so much what I’m doing,” he says, “but what producers are doing.”
The plant slaughters only about 20 head a week. Every step of the process is monitored by a USDA inspector, who does everything from ensuring that a tag bearing the name and address of the producer remains affixed to the carcass throughout the process to conducting a battery of tests, not only for BSE but also for other diseases and drug injections. “It’s easy to identify in a small plant,” Wiese says. “We can trace it back.”
Like Hunter, Wiese has strong words for the media. “I think the whole thing is blown out of proportion,” he says. “On every channel you turn the television on, it’s there, but I don’t think the public has anything to worry about.”
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James Foreman, the manager of 801 Steak and Chop House, thought that, too, as he tried to grasp the impact of the sensational headlines on the Dec. 23 evening newscasts and repeated the next day in the nation’s newspapers. With 15 menu items containing beef, a reputation for serving only prime cuts, and between 7,000 and 10,000 pounds of beef in its inventory, the restaurant, one of the Midwest’s premier steakhouses, was in a potentially precarious position.
Timing was on Foreman’s side. The restaurant was closed on Christmas Eve and Christmas Day. By the time it reopened on Dec. 26, Foreman says he was “pretty good with it all.”
“It allowed us and the public time to get educated,” he says.
As of Wednesday, Foreman had taken only one dinner cancellation for New Year’s Eve, and even then, he says, the woman emphasized she wasn’t pulling her reservation in reaction to the mad cow disease scare.
“Nothing’s changed at all,” Foreman says. “We’re sold out for New Year’s Eve.”
Chariton cattleman John Finarty, an adviser and member of Chariton Valley Beef, and restaurateur Foreman are on opposite ends of the food chain. One’s economic pain is the other’s financial gain. Finarty predicts the beef industry will lose billions of dollars and expects “the bottom to drop out completely” for some smaller producers. Conversely, Foreman says he’ll be able to increase 801’s already-thin profit margin that, in recent times of high beef prices, induced the restaurant’s staff to change some of its buying habits. For example, instead of buying only pre-cut meat, the staff began doing some of the cutting in-house. “If anything, this is going to be helpful to us and to the American consumer,” Foreman says. “Beef prices should have a chance to come down.”
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Though a reading of the full impact of the BSE scare won’t come until this week, when the Chicago Mercantile Exchange resumes normal post-holiday trading, the price declines so far are “about what we anticipated due to restrictions on exports,” Iowa State University economist John Lawrence says. “It’s going to be an evolving market, and I would not be surprised over the next several weeks to have information change as our trading partners come back on line, and depending on whether consumers react positively or negatively.”
Confidence by major trade partners such as Japan, which purchases about one-third of the estimated $3.5 billion in U.S. beef exports, is crucial, Lawrence says. That’s especially true in Iowa, which has a disproportionate number of export contracts due to a reputation for producing high-quality, grain-fed beef. Iowa cattle farmers produce 5 percent to 7 percent of U.S.-fed cattle, but are responsible for a higher percentage of exports. About a quarter of the beef Japan imports is “I-80 beef” – that is, beef produced in Iowa and neighboring Midwestern states known for high-quality cattle and management practices.
South Korea and Mexico, the second- and third-largest markets for U.S. beef, also joined a growing list of countries suspending imports in the wake of the BSE scare.
The BSE scare couldn’t have come during more optimistic times. “It’s been a very good year, and clearly this is bad news – it has, and I think will, result in lower prices,” Lawrence says. “Unless it’s resolved very quickly, we’ll have some people operating in red ink because they had been optimistic about tight supplies and prices continuing to be good. Many of our feedlots had bought feeder cattle and paid prices for inputs, expecting better prices. There are going to be some losses.”