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U.S. Beef Demand Index (1980=100)

Why Are We Here? Driving Forces for Process Verification Programs Ted Schroeder Professor of Agricultural Economics Kansas State University tcs@ksu.edu www.agmanager.info. U.S. Beef Demand Index (1980=100). U.S. Chicken Demand Index (1991=100). Markets at each stage coordinated chain,

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U.S. Beef Demand Index (1980=100)

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  1. Why Are We Here? Driving Forces for Process Verification ProgramsTed SchroederProfessor of Agricultural EconomicsKansas State Universitytcs@ksu.eduwww.agmanager.info

  2. U.S. Beef Demand Index (1980=100)

  3. U.S. Chicken Demand Index (1991=100)

  4. Markets at each stage coordinated chain, but system worked poorly - highly varied product - little price-quality distinction - no incentives to improve 1 in 5 “quality” steaks were too tough to chew!

  5. Consumers Want Meat Products: • 1. Tender • 2. Flavorful • 3. Consistently High Quality • 4. Convenient to Prepare • 5. Healthy & Nutritious • 6. Safe • Competitively Priced • U.S. beef production and marketing system failed to provide these basic requirements

  6. Ways to Improve Coordination • Vertical integration • vertical ownership - chicken model • Vertical cooperation • contracts • marketing agreements • partnerships • alliances Verification of processes

  7. 1. Fresh Branded Case-Ready Products Branded beef used to be nonexistent Now common USDA has 50 beef certification programs

  8. Retail Steak Prices Ribeye Steak Prices in Kansas City – April 1, 2000 Source: Lusk

  9. 2. Meal Packages Single dish quick fix meal consumer expenditures expanded 83% in 2001 to $141 million – AC Nielsen 472 beef products introduced in 2001 Compared to 70 in 1997 - NCBA

  10. Heat & Serve Protein Sales Growth Total heat & serve Protein sales went from $342 to $740 million. Beef sales tripled

  11. 3. Food Service Food service continues to grow Diversity of product needs Quality control in volume are critical Contracts

  12. What do they require? Product integrity High level of accountability of input supplier Product safety assurances – mega responsibility/risk Production practice assurances (including location?) Traceability Consistent continuous supply Many “Credence” characteristics More Intense Process Certification

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