Executives with the top four meat packers sat together on the same stage during the 35th Anniversary Convention of the Texas Cattle Feeders Association (TCFA) in a historic session—the first time the major packers appeared on the same stage at the same time.
But, as TCFA President and CEO Richard McDonald noted, these are unusual times, and unusual times call for unusual approaches. “We invited the top executives of the four major packers because we need to know what’s on their minds. And because they need to know what’s on ours.”
The executives heeded both challenges, expressing thanks to cattle feeders for the opportunity to discuss the future of the beef industry and for the give and take of a lengthy question and answer session that touched on subjects ranging from the packer’s perception of cattle feeders to the value of branded hides.
John Simons, president and CEO of the newly-formed Swift and Co. (formerly ConAgra Beef Company) said food safety is a major issue for everyone in the beef industry. “None of us wants or can afford more frequent and larger product recalls,” he said. “There is more pressure on regulators to show zero tolerance. This creates more pressure and drains on our human resources as all beef packers need to comply with these escalating demands.”
He said the packing segment of the beef industry is turning over every stone to enhance food safety efforts, and he thanked producers for their help through the beef checkoff. “We would like for there to be a ‘silver bullet,’ but until one is found, we will improve in small steps.”
Simons also touched on county of origin labeling, noting it will be confusing and cumbersome to implement. “There will be higher costs throughout the chain and source verification will almost certainly be required,” he said.
According to Bill Rupp, executive vice president of Excel Corporation, his company’s intent is to create distinctive value for targeted customers. However, he told cattle feeders that they are trying to create this value in a beef industry that is in turmoil.
“The problem is that demand has declined over the years, while ranch to packer costs have gone up. This means the amount of money to be shared by the rancher, feeder and packer has declined. This poses a real dilemma for the industry,” he said.
“How do we increase the revenue stream and make all segments of the industry viable? The answer lies in improving demand.”
One way packers are trying to improve demand is by offering branded products that deliver on the promise of consistency and tenderness. But to deliver branded solutions to customers, packers need to be vertically aligned with producers, he said.
“Now let me make it perfectly clear. Neither Cargill nor Excel has any interest in integrating the beef system like the poultry industry is. But we strongly believe that vertical coordination is needed. And we need a pricing system that rewards producers for creating value but also assures retailers that we can commit to a steady supply of beef for branded programs.”
Tim Klein agreed that food safety is a top priority for everyone involved in producing cattle and beef. “We’ve been involved in a research project to take a protein called lactoferrin that’s found in the immune system of mammals and that functions as a first-line defense against pathogens in living systems.”
Klein, president and COO of Farmland National Beef, said lactoferrin prevents pathogens from attaching to carcasses, making it easier to reduce the risk of E. coli and other pathogens in beef. “We’ve found a way to extract the lactoferrin from milk and reactivate it so that it thinks it is in a living system. Our application is to spray carcasses with it so if E. coli is attached to the carcass, they’ll detach and fall off.”
In addition, lactoferrin can enhance shelf life for beef products by slowing down bacterial growth in the meat case, making it one of the closest intervention strategies to the consumer. “We’re probably three months away from application,” Klein said, “then we’re going to license it to other packers as well.”
Gene Leman, senior group vice president-IBP Fresh Meats, updated TCFA members on the status of his company, which became part of the Tyson Foods family in 2001. He reported that food manufacturers, such as his company, are consolidating in order to meet the needs of a consolidating retail sector.
"Retailers want suppliers with the expertise and resources to actually handle their stores' inventory management," he said. "This changes the way we do business. It is no longer just about producing a commodity product and selling it at the best price. It is about producing what the consumer wants." He cited Tyson Foods' production of convenient, pre-cooked beef and pork as an example.
Leman said the effort to produce "the right thing" is contributing to the development of more alliances and marketing arrangements between livestock producers and meat processors. He also quoted economists who say livestock producers involved in arrangements with packers “believe they are better paid for the quality of their animals and see advantages from reduced price risk.”
Texas Cattle Feeders Association