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Disaggregating Beef Demand: Data Limitations and Industry Perspectives

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Disaggregating Beef Demand: Data Limitations and Industry Perspectives DISAGGREGATING BEEF DEMAND: DATA LIMITATIONS AND INDUSTRY PERSPECTIVES By LAUREN ELIZABETH CLARK Bachelor of Science in Agricultural Economics Oklahoma State University Stillwater, Oklahoma 2017 Submitted to the Faculty of the Graduate College of the Oklahoma State University in partial fulfillment of the requirements for the Degree of MASTER OF SCIENCE May, 2019 DISAGGREGATING BEEF DEMAND: DATA LIMITATIONS AND INDUSTRY PERSPECTIVES Thesis Approved: Dr. Derrell Peel Thesis Advisor Dr. Gretchen Mafi Dr. Bailey Norwood ii ACKNOWLEDGEMENTS: I want to first and foremost thank my generous advisor, Dr. Derrell Peel, for believing in the importance of this project, and allowing me to run with it. Other faculty felt that this research was interesting, but there wasn’t enough data to make it worth the effort. Dr. Peel, instead, saw the value in this body of research and facilitated a unique and valuable research project, unlike any that had been completed before. We traveled nearly 10,000 miles by plane or car to conduct industry interviews, and we got to visit with some pretty extraordinary people and places in Florida, Colorado, Las Vegas, Fort Worth, Kansas, and Oklahoma. The amount of information learned and the industry contacts gained will be valuable, not only for my thesis, but for my future career in the agricultural industry as well and I am forever grateful and indebted to Dr. Peel for providing me with this unique and valuable experience. I would also like to thank all of the individuals we met with throughout the research and interview process. Each person we met with was genuinely excited and supportive of the work we were doing and were generous in the amount of information and time spent with us. Without the generosity and willingness to share that each of these individuals and companies provided, this report would have little value or relevance to the issues at hand. Thank you also to the Livestock Marketing Information Center for providing a usable form of data that was relevant and useful support for our research. The various interview trips Dr. Peel and I made, would also not be possible without the support of the Oklahoma State University Department of Agricultural Economics and its support staff, especially Kareta Casey. Finally, and most importantly, I need to thank God for His blessings, providing me with the skills, opportunities, and supportive people around me who have made this and all work possible. Thank you also to my parents for their continuous support of all of my endeavors, and to my fiancé, Tyler Bell, for his love and support throughout the intense time commitments, work, and travel that this research and degree program have required. iii Acknowledgements reflect the views of the author and are not endorsed by committee members or Oklahoma State University. Name: LAUREN CLARK Date of Degree: MAY, 2019 Title of Study: DISAGGREGATING BEEF DEMAND: DATA LIMITATIONS AND INDUSTRY PERSPECTIVES Major Field: AGRICULTURAL ECONOMICS Abstract: The United States beef industry contributes nearly $70 billion (Industry Statistics, 2019) to the American economy and provides over 27 billion pounds of product each year (LMIC, 2018). The aim of this research was to better understand the complexities of the beef supply chain and what determines beef prices and demand. Through over thirty interviews with individuals representing 21 different companies and organizations, many determinants and factors impacting the beef supply chain were uncovered including exports, increasing carcass size, labor and trucking challenges, bone-in product popularity, food service and retail grocery differences, value-added products, fresh versus frozen product use, and changing consumer trends. Each of these topics are discussed in further detail throughout the report in addition to quantitative results found using the little data that was available. The end result is an aggregated report of challenges and opportunities facing the beef supply chain and evidence that more data needs to be available in order to calculate a complete beef demand system. iv TABLE OF CONTENTS Chapter Page I. INTRODUCTION ......................................................................................................1 1.1 Objectives ..........................................................................................................2 II. BACKGROUND .......................................................................................................3 2.1 Economic Theory Review ..................................................................................3 2.2 Changes in Demand ...........................................................................................9 2.3 Beef Demand Determinants .............................................................................11 2.4 Complete Demand System ...............................................................................18 2.5 Previous Work .................................................................................................21 2.6 Beef Market Complexities ...............................................................................25 III. BEEF FABRICATION ..........................................................................................30 3.1 Chuck Diagrams ..............................................................................................35 3.2 Round Diagrams ..............................................................................................42 3.3 Rib Diagrams ...................................................................................................47 3.4 Loin Diagrams .....……………………………………………………………50 3.5 Short Plate Diagram ...........................………………………………………..56 3.6 Flank Diagram ...................................………………………………………..57 3.7 Foreshank Diagram ............................………………………………………..57 3.8 Brisket Diagram .................................………………………………………..58 IV. DATA AND PROCEDURES................................................................................59 4.1 Data Discussion ...............................................................................................59 4.2 Interview/Research Process .............................................................................69 4.3 Industry Sectors ...............................................................................................70 4.3A Packers… ..……………………………….…………………………….71 4.3B Distributors ..............................................................................................76 4.3C Further Processors ...................................................................................77 4.3D Food Service and Retail ..........................................................................82 v Chapter Page V. RESULTS ..............................................................................................................83 5.1 Boneless versus Bone-In Product ....................................................................84 5.2 Cold Storage and Fresh versus Frozen.............................................................85 5.3 Cow/Holstein Beef ...........................................................................................90 5.4 Exports .............................................................................................................93 5.4A Exported Products ...................................................................................95 5.4B Asia..........................................................................................................98 5.4C China .....................................................................................................100 5.4D Other Export Markets............................................................................100 5.5 Food Service ..................................................................................................103 5.6 Ground Beef Market ......................................................................................112 5.7 Carcass Size ...................................................................................................119 5.8 Carcass Grading .............................................................................................126 5.9 Labor and Trucking........................................................................................129 5.10 Pricing Strategies .........................................................................................134 5.11 Seasonality and Regional Differences .........................................................139 5.12 Rib and Loin Comparison ............................................................................156 5.13 Retail ............................................................................................................161 5.14 Trends .........................................................................................................170 5.14A Product Specific ............................................................................170 5.14B Consumer Trends ..........................................................................173 5.14C Food Service ..................................................................................178 5.15 Value-Added Products .................................................................................179 VI. CONCLUSIONS, SUMMARY, AND FURTHER RESEARCH .......................186 6.1 Conclusions ....................................................................................................195
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