Challenges and opportunities in specialized beef

A variety of beef-production systems in the United States provides consumers with options to suit their preferences while also offering opportunities for beef producers to address specific demand niches. A new report from USDA"s Economic Research Service titled "Alternative Beef Production Systems: Issues and Implications" outlines these systems and the opportunities and challenges associated with each.

While the vast majority of U.S. beef comes from conventional production systems involving grain finishing and use of animal-health and performance-enhancing products, growing numbers of consumers prefer beef with claims for natural, organic, grass-finished or local production.

Some production systems can combine two or more of these attributes. For example, grass-finished beef could also be natural or organic and locally produced, as can grain-finished beef. Producers also sometimes "bundle" additional claims, such as those relating to animal welfare, environmental stewardship or healthfulness of beef.

USDA sets specific standards for "organic" and "grass-finished" beef, but other systems are more loosly defined.

The market for beef from alternative production systems remains small, at about 3 percent of the total beef market in the United States, but the segment has grown at about 20 percent per year over recent years.

Other key points in the report include:

  • While practices vary widely across specific beef production systems, most cattle are typically born and raised on range or pasture land for the majority of their lives.  Roughages are also necessary in feedlot rations to maintain healthy digestive systems in grain-fed cattle.
  • About 80 percent of U.S. beef comes from steers and heifers finished in feedyards. Most of the remaining "non-fed" beef comes from older cows and bulls. That beef tends to be lower quality and cannot grade Choice or Select due to lack of marbling and age of the cattle. Beef from dairy cows, which consume grain in their rations, can be higher in marbling but cannot receive higher USDA quality grades due to age.
  • Higher quality grass-finished beef comes from younger steers and heifers finished on high-quality forages under careful management and genetic selection. These cattle can reach Choice or Select grades.
  • One study found that, when fed to the same level of backfat thickness, there was no statistically significant difference in tenderness scores between beef from cattle fed grass and silage and those fed grain. Another study reported, however, that feeding grain to cattle reduced the length of the feeding period by 21 percent which generally lowers per-unit production costs.
  • Only about two-thirds of organic beef is grain-fed because of the high costs of organic feeds compared with conventionally grown feeds. One study found premiums for organic feeds were 57 percent above conventional feeds. In some years, organic grains may only carry premiums of 25 percent or so, but in other years were than 100 percent higher, helping account for the higher cost of organic beef.
  • One study found that conventional grain feeding was 52 percent more profitable than natural grain feeding and 5.6 times more profitable than organic grain feeding, due to production efficiencies, shorter feeding period and lower feed costs. Grain feeding was more profi table than grass feeding for both organic and natural production, and natural grass feeding was the least profitable technology by a wide margin, largely as a result of the small premiums associated with its products.
  • In one feedyard study, use of technologies such as implants and antibiotics resulted in efficiency gains of 17 percent in average daily gain (ADG) and 9 percent in weight-gain-to-feed ratios (G:F) from a single hormone implant. Further results indicated a 53-percent reduction in morbidity and a 27-percent reduction in mortality from mass treatment upon the arrival of cattle at the feedlot. These efficiency gains and other resulted in simulated cost advantages of conventionally produced cattle over others of $77 per head over non-implanted control groups and $349 per head over organically fed cattle. A 10-percent increase in the price of organic feed increased costs by $54 per head.
  • Consumers will pay premiums for beef from alternative production systems, although those premiums vary and researchers find what people say they will pay on a survey and what they actually will pay do not always match up. One study found consumers willing to pay a premium of $0.76 per pound for beef produced without hormones. Another found consumers in Oklahoma City, Tulsa, and Denver paid average premiums of $1.45 per pound for ground products and $5.87 per pound for steak products labeled as for attributes such as no antibiotics, no hormones or all natural. In a survey of companies that purchased and marketed naturally produced cattle, researchers found 84 percent of the companies were willing to pay a premium of $5.95 per hundredweight for products that qualified.
  • Grass-finished beef has a different flavor profile than grain finished. Some consumers prefer it and some do not. One study found 23 percent of U.S. consumers surveyed preferred Argentine grass-fed beef over U.S. grain-fed beef and were willing to pay a premium of $1.36 per pound for it. Another found consumers were willing to pay a premium of $3.44 per pound for grass-fed over grain-fed beef.
  • However, consumers discounted grass-fed beef based on flavor and sensory attributes by an average of $0.36 per pound in one study and $0.55 to $0.82 per pound in another. One found that 62 percent of U.S. consumers who preferred U.S. grain-fed beef over Australian grass-fed beef were willing to pay a premium of $1.61 per pound for domestic beef.
  • Cattle in grain-finished systems generate less greenhouse gas emissions than those on pasture, and efficiency gains in both dairy and beef production that have further reduced environmental impacts per unit of meat output.
  • More land is needed to produce a given quantity of grass-fed beef, or less beef production will occur per unit of land, than conventional beef because of the extended periods on pasture, meaning higher ownership costs per unit of beef produced.

View the full report from USDA/ERS.


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