Dr. Tom Troxel Dr. Michael L. Looper
The Impact of Higher Beef Prices: What’s Really Happening? Much attention is being paid to the higher cost of beef, yet sales data and market research show demand for beef remains strong. Beef continues to be a cornerstone of the retail meat case, it’s featured on almost every restaurant menu, and Americans continue to purchase beef, even at higher prices.
Overall food prices are estimated to increase between 2.5 to 3.5% in 2014. Meats, poultry and fish, specifically, are forecasted to increase 3 to 4% this year. If you compare current beef prices to the same time period a year ago, the price is up about 13 cents more per serving.
Americans are beginning to see higher food prices when shopping and dining out. But the rising cost of beef is not deterring Americans from buying beef at the store or enjoying a beef meal at their favorite restaurant. Overall, 90% of Americans say they are still enjoying beef on a monthly basis, and more than 70% say they find steak prices acceptable at the grocery store and in restaurants. The demand for beef is strong and we are seeing this demand in the form of higher prices.
So the question is this — how are higher beef prices affecting retail and foodservice operators and consumers and how are they responding, and what is the outlook for beef?
How are Americans responding to higher prices?
Americans are continuing to purchase and enjoy beef, and they’re willing to pay more for it. A recent food demand survey conducted by Oklahoma State University showed consumers were willing to pay $6.35 per pound for a steak and only $4.63 for a chicken breast and $3.51 for a pork chop at the store.
Americans, specifically older millennial parents, are placing more importance on the value of food quality, taste and meal experience than the price of their food. Millennials are willing to pay more for high-quality foods like beef because it delivers on taste and quality like no other protein.
How are higher prices affecting retail operators?
When it comes to retail, dollar sales are king, and beef sales are vitally important to a healthy meat department. Beef is – and should continue to be – a focal point of every grocer’s meat department merchandising and marketing efforts. Not only does beef net more sales, pound for pound, than pork or chicken, it also makes up 8 percent of total supermarket sales and accounts for 49.5 percent of dollars sold in meat-case sales.
Beef drives traffic to stores and the meat case during the grilling season. And Americans say they’re twice as likely to visit a grocery store that is promoting beef for grilling, over a store that promotes any other protein.
How are higher prices affecting foodservice operators?
Beef’s performance in foodservice is remarkably solid despite operators’ higher food costs. In fact, beef volume increased by 79 million pounds in the past year, to a total of 8 billion pounds. As the economy strengthens, Americans are going out to eat more often. Overall foodservice industry sales increased 3.2% to $682.3 billion in 2013 – and beef is their protein of choice.
Restaurant-goers who order steak report a higher satisfaction with their meal, they spend more and they are very likely to continue visiting a restaurant. Research shows that Americans spend more at a restaurant when they order a steak as an entrée, resulting in a higher check (27% higher than ham/pork and 53% higher than chicken). Additionally, steak drives the sales of other menu items, like side salads, alcohol and desserts. Operators know this; nearly all (97%) of restaurant operators feature beef on the menu.
And since the recession, foodservice operators are constantly evolving their menu to manage their food costs, while at the same time continuing to menu their mainstay steaks like sirloin, top loin and ribeye.
One way foodservice operators can weather higher prices is by promoting a variety of beef cut options, learning how to fabricate cuts most effectively, and stressing beef’s flexibility through new culinary ideas, preparation and serving tips. To assist operators in this effort, the Beef Checkoff provides tools and resources that educate operators on making the most of the beef they’re buying, menuing new beef dishes and understanding the current trends that drive millennials to purchase beef. Many of these resources can be found at BeefFoodservice.com.
A tight cattle supply, primarily due to the prolonged drought impacting many cattle-producing states, is just one of the factors impacting higher beef prices. According to Dr. Joseph Glauber, Chief Economist, U.S. Department of Agriculture, to combat low domestic cattle herd sizes, producers are working toward rebuilding their herds. However, due to “high feed cost and drought, we have not seen the expansion that we might have thought possible given the high price of cattle. Typically when there are higher prices for cattle, the domestic herd expands. Expansion takes time,” explains Dr. Glauber.
America’s beef community has faced detrimental challenges to increase cattle and beef supplies, particularly from the longest drought in our most productive U.S. cattle markets. Unlike some proteins, raising high quality beef takes time, as does our ability to quickly shift to meet growing demand. While it can take up to three years before beef is available for consumption, cattle farmers and ranchers are slowly beginning to rebuild their herds to meet consumer demand.
Conclusion Much attention is being paid to the higher cost of beef, yet sales data and market research show demand for beef remains strong. Beef continues to be a cornerstone of the retail meat case, it’s featured on almost every restaurant menu, and Americans continue to purchase beef, even at higher prices. Despite tighter cattle supply and the increasing cost of food across the board, beef demand is the highest it’s been in years (Source: written by Mackenzie Jordan, Beef Issues Quarterly, June 2014).
The Animal Industry in the United States is one of the largest and most important economic sectors. Therefore, it is imperative that we understand the type of animals that are most efficient and most valuable in production. The subject of livestock evaluation is an important division of animal husbandry and is related, in a most vital way, to the other major divisions of feeding and breeding. In any program whose purpose is to recognize an appreciation of improved livestock, successful methods of production and marketing should warrant special attention. Success in the production of livestock depends, in a large measure, on the ability to see merit in breeding animals; and to understand values when buying and selling. The ability to evaluate is a cornerstone in the success of all aspects of livestock production.
One of the most powerful tools a breeder of livestock possesses is selection. Selection is defined as a means of appraising an animal’s value for the purpose in which they are produced and improving upon that value in the next generation. Preventing inferior animals from reproducing and allowing the superior animals in the current generation to become parents of the next generation should help increase the proportion of genes having the desired effect on traits of economic importance. Consequently, the ability to identify potential seedstock with excellent genetic merit is essential to livestock breeders. The use of Expected Progeny Differences (EPD’S) has improved our means of evaluating an animal’s genetic value as a parent. Therefore, understanding the proper use of these tools and some fundamental concepts is very important for success in selection programs.
The basic concept of genetic prediction, the use of EPD’s, is more valuable than individual performance records, within herd ratios or performance tests because all of these pieces of information along with heritability values are taken in consideration when calculating an estimated breeding value (EBV) of an animal. Then, because we all know that progeny will inherit ½ genetic material from each parent, EPD=1/2 EBV. The concept of an EPD is very easy to understand from here because it is truly the expected difference in performance between progeny.
Bull A has a Yearling Weight EPD of 75
Bull B has a Yearling Weight EPD of 95
When mated to similar cows, you should expect calves sired by Bull B to weigh approximately 20 pounds more on average as yearlings than calves sired by Bull A. This could mean B’s calves would average 950 pounds while A’s calves would average 930 pounds. This may not sound significant, but Bull B could potentially sire close to 2,000 more pounds of beef than bull A over three years and the price of cattle at this point makes him much more valuable.
Although the methodology may be complicated, EPD’s are actually very convenient to use. Genetic prediction is utilized extensively in the beef and dairy industry, and can be one of many tools along with keen skills for visual evaluation that can be used to move your program in a profitable direction. Remember, in the large picture of livestock breeding, triumph depends largely on the insight and wisdom used in the selection of parents, in the matings decided upon, and in culling from each generation the inferior. Mistakes in the selection of animals for breeding purposes are more costly because unborn generations are affected, and consequently the results are not apparent until after damage has been done and the future of the herd jeopardized.
For more detailed information on selection and understanding the use of EPD’s you can contact your local extension agent, breed association or download publications on the University of Arkansas Division of Agriculture web site: http://uaex.edu/farm-ranch/animals-forages/beef-cattle/breeding-genetic-selection.aspx
Dr. Tom Troxel Dr. Michael L. Looper
Department Mourns Loss of Long-Time Professor
The University of Arkansas Division of Agriculture Department of Animal Science recently said goodbye to a longtime member of the faculty. Dr. A. Hayden Brown Jr., 67, of Fayetteville, died May 26, 2014, in Washington Regional Medical Center in Fayetteville following a short illness.
He was born Oct. 13, 1946 in Cookeville, Tenn., to Mrs. Imogene (Jean) Flatt Brown of Cookeville and the late Avert Hayden Brown, Sr. He grew up on a farm run by his Ma and Pa Flatt (Carlie B. and Vella Rogers Flatt). He graduated from Cookeville High School in 1964 and from Tennessee Tech University in 1968 with a bachelor’s degree in animal science and began working for the Cooperative Extension Service, University of Tennessee, as an assistant extension agent in Jamestown, Tenn., from 1968-74. He earned M.S. (1974) and Ph.D. (1976) degrees in animal breeding and genetics from the University of Tennessee, Knoxville. He and his wife, Helen, married on Sept. 9, 1977, and moved to Fayetteville.
He worked at the University of Arkansas, starting in 1977, serving as an assistant, associate, and full professor in the Department of Animal Science. A celebration of his life was held in Fayetteville on June 1 at the Pauline Whitaker Animal Science Center, University of Arkansas. Memorials may be sent to the Scholarship Fund, Department of Animal Science, University of Arkansas, 1120 W. Maple St., AFLS B114, Fayetteville, AR 72701.
Department Hosts Annual Judging Camp
The Department of Animal Science recently hosted its annual summer judging camp. Bringing together kids ranging in age from 9-18, from all across the state; the camp offers participants a chance to learn and prepare for the upcoming 4H and FFA state competitions.
Lasting three days, the camp teaches attendees to evaluate sheep, hogs and cattle; and how to formulate a set of reasons for ranking the animals in the order they chose. The camp also helps teach and improve public speaking and decision making skills.
Every year the camp ends with the campers participating in a judging competition. They evaluate several categories of the animals that they have learned about during the previous days; rank the animals then present their reasons for their choices. During the competition the campers are broken out into three groups: beginner, intermediate and advanced. Awards are presented in each group for highest points overall, reasons and in each individual category.
This year during the awards presentation, Bryan Kutz presented recognition awards to Joe Don Greenwood and Steve Jones. Both have been involved in the judging camp for many years and both are retiring this year.
This was the 14th time the Department has hosted the camp and the proceeds help with the Department’s Judging team’s traveling expenses.
Beef Cow Liquidation Halts
Total beef cow slaughter so far in 2014 is down 13% compared to last year, and is on pace to be down 300,000 to 400,000 head for the year. During spring and summer 2013, beef cow slaughter rates increased more in line with the seasonal trend, but this year it is clear that more producers are holding onto cows given the record-high calf prices and better pasture conditions for much of the country.
Beef cow slaughter rates have been flatter than normal from March through June, and the overall slaughter levels have been well below recent years. Last year, beef cow slaughter dropped off relatively significantly during the last five months of the year. As a result, this year’s beef cow slaughter will likely close the gap with last year somewhat during the last five months.
Remember, CattleFax expects total beef cow slaughter for 2014 to be down 11 to 13% compared to last year. Add to this the trend of a lower percentage of heifers compared to steers going into the slaughter mix, and it suggests the beef cowherd is in fact on target to be larger on January 1, 2015. This year will mark the third year in a row for declining beef cow slaughter, which will be down 1 million cows compared to what it was in 2011 (Source CattleFax).
Influencers on Feeder Cattle Futures
Due to tighter calf supplies and supportive demand from feedyards for replacements, feeder cattle futures have been trending significantly higher this year. The August feeder cattle futures prices have increased about 15% since April 1. With an increase of this magnitude, there is a natural desire to identify future price trends. Remember feeder cattle futures are strongly correlated with deferred live cattle futures due to the supply relationship: consumer demand for beef, demand for fed cattle drives feeder demand, etc. Feeder cattle and fed cattle prices movements are often in lockstep because of this relationship. Based on more than 40 years of data, the 2014 price relationship has only been stronger 16% of the time.
Corn futures prices can also influence feeder cattle futures, but the relationship between these two variables is not nearly as impressive. It takes a structural breakdown in the feeder cattle and fed cattle relationship for corn prices to become a more consistent factor. For instance, look at August feeder cattle and December live cattle futures. Several periods saw the price relationship deteriorate: 87-88, 99-00, 07-08, 11-12. In these years, tighter corn supplies created a stronger than usual feeder cattle to corn relationship. Analysis shows for these years, a 10% increase in corn price corresponded with a $51/cwt increase in feeder cattle futures prices. Therefore, focus on the corn market if the current relationship between feeder and live cattle weakens (Source CattleFax).
Join us July 1, 2014 for Forage Management Program
For more information, contact Dr. Paul Beck
Phone: (870) 777-9702 ext. 105
Southwest Reserach & Extension Center
362 Highway 174 North
Hope, AR 71801
This time of year, cattle producers begin to ask ‘Should I creep feed my calves?’. The answer isn’t as simple as yes or no. There must be a definitive purpose for creep feeding and purposes may include:
Increase weaning weight of purebred bulls and heifers
Increase growth and maturity in replacement females
Increase weaning weight of commercial market calves (steers and heifers)
Take nursing pressure off the cow
My neighbor creep feeds
While some of these bullets are justifiable, others are erroneous and some have the potential to be detrimental to both production and the pocketbook. For instance, heifers that become fleshy early in life due to creep feeding may have reduced milk production as a first-calf heifer and market data shows fleshy to fat cattle are discounted $5 to $18/cwt. Arkansas markets during the week of May 29, 2014 reported fleshy heifers, although few in number, discounted $17/cwt.
A common myth is creep feeding calves provides relief to the cow. Calves that are creep fed will continue to nurse their dams; therefore, creep feeding won’t be a direct benefit to the cow. If creep feeding benefits the cow, it will most likely be an indirect response to having slightly more available forage if calves are being creep fed at a high enough rate to substitute creep feed in place of pasture.
Forage quality and quantity should be the initial determinant of the creep feeding decision. Creep feed is essentially a supplement to or substitute for pasture forages during the 60 to 90 days prior to weaning when a substantial part of the calf’s diet is no longer milk, but pasture. By this point in a calf’s life, milk has become more of a supplemental food source.
The economic return to creep feeding is influenced by creep feed, feed conversion and feed cost. Creep feed, feed conversion is the amount of additional weight gain associated with creep feeding. For instance, if calves gain, on average, 2.25 lb per day without creep feed but gain 2.5 lb per day when fed 1 lb of creep feed per calf, daily, the creep feed conversion is 1 ∕ (2.5-2.25) = 4 lb feed per lb additional weight gained.
Table 1 below provides a guideline for possible creep feed conversion ratios given various categories of forage quality and quantity.
To help determine the break-even point between creep feed, feed conversion and feed cost, table 2 provides the break-even value of the additional weight gained.
While forage quality and quantity will ultimately determine calf response to creep feeding, feed price and calf value will ultimately determine return on investment for calves that will be marketed after weaning.
A common mistake when evaluating the value of gain is to apply current market price as the value of gain. In Arkansas, 550 lb steer calves were averaging $208/cwt the week ending May 29, 2014. Although these calves are selling for $2.08 per pound, this is not their value of gain.
To examine the value of additional weight gain based on current market prices, calculate the difference in total gross income for two different weights and divide that value by the difference in weight to estimate value of gain. For example, 475 lb number 1 steers were selling for $2.23/lb and 525 lb number 1 steers were selling for $2.13/lb. The value of gain from 475 to 525 lbs is (1118.25 – 1059.25) / 50 = $1.18/lb.
Based on the value of gain and using table 2 above, if creep feed costs $260/ton delivered, steers would need to convert creep feed to weight gain at a rate less than 9 lbs feed per lb of additional weight gain. This rate of creep feed conversion or better could be expected when forage quality or quantity is moderate to low. If creep feed were to cost $320/ton, it is very unlikely feed conversion will be good enough to be profitable.
As a general rule, lower supplementation rates have better feed conversions. If forages are low in protein but not limited in the total amount available for grazing, place more emphasis on supplementing with just 1 to 2 pounds of a high protein supplement. If forages are moderate in protein content or forage quantity is limiting, consider a moderate protein supplement, and if necessary, feed at higher rates (1% body weight) when forage substitution is needed.
John Jennings, Professor – Extension Forages
The highs and lows of pasture growth over the past three years have shown one thing is for certain. Producers following a good pasture management strategy have a more consistent supply of forage than those that rely only on Mother Nature. With rising costs, controlling inputs is important. But the main input of pasture planning is strategy and that doesn’t cost anything. How you manage pastures in this season or this month greatly influences pasture performance in the next season or next month. For example, grazing a fescue/clover pasture early in April promotes more leafy grazing thirty days later and less seedstalks. Cutting fescue hay down to a 2-inch stubble in late June just as high temperatures hit in July stops growth and causes a lot of stand damage. The key to good pasture strategy is to stay on schedule. So this article will give some grass growing points and details for the remainder of summer into fall. Our experience on the research stations at Batesville, Fayetteville, and Hope and with many producers across the state, north to south and corner to corner, shows that all these practices work (or else I wouldn’t be recommending them).
July: Plan for a last hay crop and for grazing through the rest of summer
- Rotate pastures on a weekly basis to keep grass in a growing stage. This will be worthwhile when drought occurs. (Savings from improved grazing management = 2-3 weeks more grazing when drought hits)
- Fertilize for the last summer hay cutting and then cut and put it in the barn. Don’t plan on feeding it until late winter because you will be planning to grow lots of fall pasture. Barn stored hay will keep through next year and longer. (Savings from reducing hay waste with covered storage = 15% to 25% of your crop).
August: Plan for fall pasture
- Pick one or two bermudagrass or bahiagrass pastures to stockpile for fall grazing. These could be where you cut that hay in July. Clip or graze the stubble to about three inches tall and apply 50-60 lbs/acre of nitrogen fertilizer between August 1 and 15 (August 15 and 30 for far south Arkansas). Then let it grow until October just as you would for a hay cutting. But you will plan to strip graze it using a single temporary electric wire to make it last longer. The level of quality in this forage will support your cows until late December if enough forage is available. (Savings from grazing stockpiled forage instead of feeding hay = $25-$50 per animal unit or $50-$75 per acre of forage stockpiled).
- Pick a bermudagrass field or a field to be renovated and plant forage brassica and ryegrass. Brassica planted in late August or early September on a lightly disked pasture will be ready to graze by mid to late October or can be deferred to graze in late November to December after the stockpiled bermudagrass. This option gives fescue/clover pastures more growing time in fall for grazing in November and December. The companion ryegrass in the mixture will be ready to graze in March and April. (savings from forage brassica/ryegrass = $25 to >$100 per animal unit)
September: Plan for winter pasture
- Pick a fescue field to stockpile for winter grazing. Clip or graze off old fescue forage to a 3-inch stubble and apply 50-60 lbs/acre of nitrogen fertilizer between September 1 and 15. Let it grow until early December or defer until January 1 if you have brassica to graze in December. Strip graze it with a single temporary electric wire to make it last twice as long as it would without strip grazing. The level of quality in this forage will support cows until spring greenup if enough forage is available. (Savings from stockpiled forage instead of feeding hay = $25-$50 per animal; Savings from strip grazing = an additional $10 per animal unit)
- In bermudagrass-based systems, interseed wheat and ryegrass for winter and spring grazing. Plant in a disked pasture in September and apply N fertilizer after emergence for grazing by December. Planting in October/November delays grazing until late winter or spring.
- Test all hay to determine quality levels. Producers had lots of hay last winter, but many complained at the poor performance of their animals being fed. Hay tests help you feed the best hay when livestock need the best quality. You can also limit feed hay to animals grazing winter annuals or stockpiled forage. This makes the pasture last longer and supplements hay quality.
With all this winter grazing, maybe you didn’t need to harvest that last summer hay cutting after all. Good thing it’s stored in the barn.
Dr. Tom Troxel Dr. Michael L. Looper
Spring Commencement a Big Moment for Students
On May 10, the University of Arkansas conferred degrees to those students at the spring commencement ceremony. The Department of Animal Science proudly boasted a First Ranked Senior Scholar, a Senior Scholar and two Distinguished Graduates.
Named as one of two First Ranked Senior Scholars, Jessie Hargis graduated with a 4.0 GPA after completing all of her coursework at the University of Arkansas. The daughter of Billy and Kristen Hargis of Fayetteville, Jessie was a regular on the Chancellor’s list and was a four-year recipient of the Chancellor’s scholarship. She plans to attend the LSU School of Veterinary Medicine in the fall.
Claire Crews earned the distinction of being one of three Senior Scholars. The Senior Scholar awards are given to those students who have a 4.0 GPA with at least half of their coursework completed at the U of A. The daughter of Vickie Salsbury and Claiborne Crews, she was a member of the Razorback Marching Band; president of the Pre-Vet Club; and studied abroad in Belize providing free veterinary services to animals owned by low-income families. Claire will be attending Veterinary School at the University of Missouri in the fall of 2014. Claire also was a Bumpers College Honors Program Distinguished Graduate.
Rachel Cummins was a Bumpers College Honors Program Distinguished Graduate. She is the daughter of Hal and Patti Cummins; she wrote her honors thesis on the “Palatability of Teff Grass in Horses”. She will be attending Veterinary School at the University of Missouri in the fall of 2014.
In addition, the Department presented a Doctor of Philosophy to Michelle Thomas. Five Master of Science degrees were presented to: Mohan Acharya, Elizabeth Backes, Jace Hollenback, Brandon Smith and Ashley Nicole Young.
The Department also conferred 45 Bachelor of Science degrees. Congratulations to all of our graduates!
2012 Census of Agriculture is Released
The U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) conducted the 2012 Census of Agriculture, analyzed the data, and prepared a report you can download. You can find the report at www.agcensus.usda.gov/. The report is 34,925 KB so it’s contains a lot of information. The census provides a comprehensive picture of American agriculture in 2012, and NASS recognizes and appreciates that many individuals and organizations contributed to the effort.
Most importantly, the success of the agriculture census depends directly on the cooperation of farmers and ranchers across the country. Recognizing that participating in the census is their responsibility and gives them a voice in their future, agricultural producers took the time to provide the information requested. NASS is grateful to every producer who participated in the 2012 Census of Agriculture.
Also essential were the many partners who communicated about the census and encouraged producers to respond. Farm organizations, stakeholder groups, agricultural media, community-based organizations, and land grant and other universities helped to build awareness of the census and its importance to producers, their communities, and U.S. agriculture as a whole. NASS appreciates their help in reaching all kinds of agricultural operations, thereby ensuring a comprehensive census.
United States Data
There is a lot of data in the 2012 Census of Agriculture but the data we are going to share with you is the beef cow inventory. In the US there were 727,906 farms with beef cows (2012) which were a 4.8% decline compared to the number of farms with beef cows in 2007. The beef farms in 2012 contained 28,956,553 head of beef cows which means the average herd size in the US was 40 head of beef cows.
The number of US farms with 1 to 49 head of beef cows was 81% and but only controlled 29% of the beef cows. The number of US farms with 50 to 99 head of beef cows was 10% and they controlled 16% of the beef cows. In addition, the number of US farms with 100 to 199 head of beef cows was 5% and they controlled 17% of the beef cows. The largest beef herds (200 head or more) only consisted of 3.8% of the US beef farms and but they controlled over a third (36%) of the beef cows.
In Arkansas there were 23,385 farms with beef cows (2012) which were a 7.4% decline compared to the number of farms with beef cows in 2007. The beef farms in 2012 contained 813,250 head of beef cows which means the average herd size in the Arkansas was 35 head of beef cows. The January 1, 2014 census listed Arkansas with having 882,000 beef cows so cow numbers have increased by 68,750 head since 2012. With the 2012 drought it is hard to say how many beef cattle farms are in the state in 2014. Many would speculate the number of farms have declined since 2012.
The number of Arkansas farms with 1 to 49 head of beef cows was 81% and controlled 40% of the beef cows. The number of AR farms with 50 to 99 head of beef cows was 12% and they controlled 23% of the beef cows. In addition, the number of AR farms with 100 to 199 head of beef cows was 5% and they controlled 18% of the beef cows. The largest beef herds (200 head or more) only consisted of 2% of the AR beef farms but they controlled a fifth (20%) of the beef cows.