At the time of my Nuffield scholarship award in January 2012, beef was in short supply globally with herd size also declining in the majority of beef producing nations. Population growth projections together with increasing demand for beef meat in regions of the world (where increasing affluence was creating greater demand for an aspirational food like beef), were also increasing pressure on the shortage of supply. Regions like SE Asia not only were providing increasing demand for fifth quarter cuts, but also higher end cuts as increasingly cosmopolitan urban consumers eat out at the steakhouses that were now appearing.

This scenario made me wonder what regions of the world were going to increase supply to meet this increasing demand, especially at a time when the beef herd was shrinking around the world. Beef production was also under attack for producing vast amounts of methane gas which damaged the environment. Increased ethanol production was sucking up grain maize that would previously have gone toward feeding beef cattle particularly in the US, thereby increasing feed costs through increased competition. Chicken was increasingly becoming a cheaper, more convenient alternative form of protein for consumers, and was low in cholesterol.

The beef industry in the UK was experiencing a period of price rises as demand outstripped supply. There had also been a number of acquisitions in the abattoir processing sector that was rationalising the industry into fewer players, with an increasing influence of southern Irish ownership. Dialogue in the industry was very much between processors and retailers, with suppliers largely left out of this communication loop. The supply chain structure was therefore fairly dysfunctional with price signals used as the main lever to draw beef into the supply chain. This meant predicting supply in both the near and distant future was in effect left to chance; the chance being that either beef producers would not be able to act quickly enough to meet demand or that they were ultimately going out of business due to lack of profitability and so weren’t there to supply beef anyway.

So my overall thoughts were how does the UK beef industry fit into the new world order of increasing demand for beef? Do the regions of the world where new and increasing demand is occurring provide an opportunity for the UK? With the UK providing one of the highest beef prices in the EU, will this draw in imports of beef, especially as we already aren’t able to meet current demand? These were questions that were constantly being debated in my capacity as a member of the NFU Livestock Board and Meat South West board. On a more personal note, how could my own farming business respond to these challenges and make the most of potential opportunities?

Report Summary

The predicted growth in the global population in the coming decades has given rise to a debate on how agriculture can rise to the challenge of meeting the growth in food demand this will create. In tandem with this overall trend, developing nations are rising in affluence and creating new demand for higher quality and more expensive forms of protein, such as beef. Despite this new demand for beef, the last 30 years has also seen demand for poultry meat soar upwards whilst the popularity of beef has stagnated as consumers in developed nations have sought lean meat, convenience and lower priced options like chicken. Compared with poultry, beef has also been criticised for having a poor feed conversion ratio and for being an inefficient user of resources globally.

The goal of my report was therefore to determine how the beef sector globally can respond to this scenario, and how the UK fits into this jigsaw. I travelled to SE Asia where population and beef demand are growing rapidly to learn about what form this demand was taking and to investigate if the UK beef sector could supply some of this demand. I travelled to North and South America to look at different ways of producing beef (grain versus grass) and to learn who was most likely to meet the global demand for beef and what management and traceability framework is required. My visit to Northern Ireland looked at how UK beef processors are faring on the export market, and also how and why the chicken industry has become so successful in recent times.

In SE Asia there are opportunities for UK meat plants to export fifth quarter products and add more value by further processing. More export promotion, a focus on quality and better branding are required to meet this consumer demand successfully. Beef production globally will gravitate towards the regions where cost of production is lowest and most sustainable. Whilst much of the global beef demand is for grain fed beef, the large industrialised feedlot systems that produce this in North America look unsustainable due to cost and competition for grain from ethanol plants. The grass fed systems of South America and parts of North America appear more sustainable and cost effective. As a grass growing nation, the UK too needs to refocus on native breed cattle fed on grass, using high levels of grazing management to be competitive. This can then be sold as a high quality branded product to affluent markets like the EU (which is very much a global target for beef exporters everywhere) and high end outlets in developing markets. An effective traceability system, innovation and integrated supply chains are a must for beef production everywhere if the sector wants to compete long term with poultry.

Conclusions

Beef production globally will gravitate towards the regions and nations where cost of production is lowest and most sustainable. This favours grass over grain.

• Global demand for beef is spreading to areas with rising affluence.
• The EU is a long term net importer of beef and its affluent consumers are very much a target for beef exporting nations.
• The UK beef industry needs to refocus on native breed production to gain consistency and quality of production using well managed rotational grazing systems.
• There are opportunities for UK meat plants to export fifth quarter products and add more value by further processing, together with more export promotion.
• The beef industry can learn from the innovation, breeding programmes and integrated supply chains that exist in the poultry sector.
• An effective cattle traceability system is a must for beef exports.

Recommendations

The UK beef industry would benefit from adopting certain aspects of North American beef production. These include: greater consolidation of cattle numbers to increase economies of scale, greater integration of research and development on farm, better management of risk and volatility through hedging inputs, incentivising the eating quality of beef by picture grading the rib-eye for marbling and yield, more innovative arrangements of cattle ownership to increase the availability of equity in primary production, use of real time on-line livestock auctions, use of systems management frameworks to improve on farm efficiencies.

The EU should stand firm against US demands to accept beef produced with growth hormones, as plenty of beef is available from grass fed South American beef where growth hormones are not used.

The UK, because of its high cost of production, is best placed to produce high quality value added food products together with diversified urban linked enterprises, like tourism and farm shops. If subsidies disappear, more commodity beef is bound to be imported from other areas of the world where cost of production is lower.

The UK beef industry needs to refocus on native breed production to gain consistency and quality of production using grass based systems. This product would also find markets in certain EU export markets and high end markets in SE Asia if well branded and linked to a PGI. Better grazing management in the beef sector is needed, similar to those rotational grazing methods now commonplace in dairy.

The beef industry needs more innovation, better breeding and programmes and integrated supply chains similar to the poultry sector to become more competitive.

UK beef exports require more promotion and people on the ground in the countries where demand is greatest or has most potential, like SE Asia. This will require more resources, greater political backing, better coordination between exporters and politicians, and a more proactive approach when enquiries come in from potential customers.

Consolidation of cattle numbers is key, as well as knowing the margins of the retailer and meat packer as well as your own return on capital as a producer.

The EU should be highlighting the lack of traceability in the US livestock industry, use of growth hormones, E colirecalls, disingenuous Certified Angus scheme, and disingenuous geographical product labelling. The US argues that consumers should be allowed to decide for themselves over growth hormones, however EU producers have to operate under stricter rules than their US counterparts.

Uptake of the Beef Information Exchange System (BIXS) in Canada (an information and traceability flow system) is low at present, and maybe BIXS is trying to be all things to all people when perhaps private enterprise might be better placed to run an identification, traceability and database system. A multi-species system is only really possible with RFID tags but the expense improves efficiency and would provide valuable information in regard to risk based trading and animal health status. This type of system is needed in the UK if we are to be an effective long term player on the export market.

For export licences to be granted into mainland China, the UK needs greater backing at government level and more awareness that politically sensitive actions will have negative consequences for trade.

More trade organisation resource people on the ground are needed to promote English beef more effectively. The US and Australia have impressive networks. UK meat plants need to re-learn how to produce the right quality and spec for the export market.

There are opportunities for UK meat plants to process hides and skins further and sell as a wet blue product into tanneries.

There is an opportunity to sell beef trim in condensed rolls ready for slicing and cooking in a hot pot in Hong Kong. Hong Kong is a wealthy market and is open for bone-in beef from the UK and should be prioritised over mainland China for both high end cuts and offal. Macau is also a casino drenched wealthy out post which offers great opportunity. Many I spoke to in Hong Kong were completely unaware that UK boneless beef has been available to import into Hong Kong since 2009. One major UK exporting meat plant I spoke to was unaware that bone-in beef exports have been permitted since June 2012. How can this be?

Overall, we are fantastically fortunate to have 60 million affluent consumers right here on our doorstep plus another 300 million within our EU trading block. Many beef exporting nations are extremely envious of this.

We are also fortunate to have a wet and mild climate that produces grass almost all the year round. This is the cheapest, most cost efficient and sustainable way to utilise the undulating slopes in the UK by grazing ruminants using efficient rotational grazing practices. A more integrated beef supply chain is also essential to link production to demand and manage supply of high quality branded beef effectively.