Experts praise Walmart, other stores’ move to sell higher-grade meat
December 13, 2011
Walmart’s recent shift to sell higher-quality beef comes as music to the ears of those involved in the beef industry.
The world’s largest retailer – with more than half of its $260 billion in U.S. sales last year coming from groceries – confirmed last month that it’s now selling choice-grade beef at all of its 3,800 U.S. locations after it started ramping up its selections this summer.
“Walmart’s decision to offer USDA choice beef is a fantastic move from our point of view, because it helps renew consumers’ interest in beef,” said Pat Huebner, vice president of research and development at JBS USA. “When any retailer increases demand for beef, it’s great for the industry – and that means positive growth for us.”
JBS and other beef companies will happily take the help.
Many are experiencing trying times – expecting to cut back on the number of cattle they slaughter, which stems from the drought that scorched Texas, New Mexico, Oklahoma, southeastern Colorado and other areas this year, and from high feed costs, all of which caused farmers and ranchers to sell portions of their herds early.
The expected reduction in the number of cattle available for slaughter has caused packing plants to pay higher prices for cattle and to operate inefficiently, JBS officials said, with many companies reporting losses.
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However, “this movement toward better-quality beef should mean good things, at least in the long run,” said Jim Robb, director of Colorado State University’s Livestock Marketing Information Center in Denver.
As Robb further explained, it’s not just Walmart making the change. Conditions in the industry have caused beef prices to increase for consumers – and since they’re paying more, they expect more.
“We’re really seeing a lot of businesses – restaurants, grocery chains – making this shift, not just Walmart,” he said. “And it’s all very good advertising for the beef industry.
“When the recession hit, you didn’t hear much talk about a demand for better quality beef, or other products, at least from the customer point of view. It was more about what was affordable for families.
“But now that we’re coming out of that … and the fact that beef prices are going up … consumers are demanding better quality.”
Walmart traditionally has sold only select-grade beef, which is of a lower quality.
Choice beef has more internal fat, which makes the meat tender and more flavorful, while select beef is tougher. Ratings are placed on beef by federal inspectors on a voluntary basis.
The Bentonville, Ark., retailer has stressed that it is still offering lower grades of meat for value-conscious consumers.
Recently, choice beef has gotten more expensive while select has become cheaper. The price difference between the two grades of meat has increased to about 20 cents a pound, up from 3 cents a pound earlier in the year.
Officials at JBS USA – a company headquartered in a county that ranks No. 3 nationally in the value of all livestock, poultry and their products – couldn’t release information regarding the amount of beef it sold to Walmart, or give a percentage breakdown of the beef the packing plant produced. However, it provided a percentage breakdown for the entire beef industry, noting that about 4 percent of beef produced in the U.S. is prime, 52 percent is choice, 39 percent is select and 5 percent is standard.
The interest by Walmart and others in higher-quality meat is being welcomed by cattlemen who raise choice animals.
They haven’t always been rewarded for the higher feed costs and better animal genetics it takes to produce choice beef. Because of that, there could be an initial lag in the supply of choice beef for a while, Robb said, even as demand for it increases.
“Until cattlemen receive better premiums for better-quality beef from companies, there won’t be any incentives for them to produce more high-quality beef,” he said. “With that lack of supply early on, this movement toward higher-quality beef could hurt companies in the short term.
“But in the long run, I think it will do good things.”