Hurray for the Hamburger

— by Lee Pitts

You’re trying to do the right thing, using EPD’s, DNA, $5,000 range bulls, and all the tools at your disposal to produce the best beefsteaks money can buy. But what the consumer really wants is a good old fashioned hamburger, which, by the way, can be made with any old dairy cow, Mexican Corriente, Australian fat, or any combination thereof.

The American rancher has made great strides since the 1970s when they were experimenting with a bevy of breeds in a rush to produce quantity, not quality. We paid for our sins by watching beef consumption in this country go from 90 pounds per person to barely over 50 pounds. I can vividly remember a great speech delivered by Hop Dickenson, the Hereford Association Executive Vice President back in the 1970s in which he said going out to dinner and ordering a steak was like playing Russian Roulette in that you had a one in six chance of getting a good steak. But now, thanks to a big infusion of Angus genetics and the conscientious job purebred and commercial cattlemen are doing, nearly two thirds of today’s feedlot fat cattle will grade USDA Choice. The only problem is, 62 percent of the beef Americans will consume this year will be in the form of hamburger. And you don’t need a Prime or high choice, yield grade one steer to produce that.

We are a nation of burger eaters. And as hard as this may be to believe, many of the millennial generation, which is slowly displacing the baby boomers as the largest segment of consumers, would rather eat a good hamburger than they would a great steak.

We are told constantly by industry big shots that what the consumer demands can only be produced by well-marbled Choice and Prime quality cattle. I know this will sound like heresy, but if we really are trying to produce what the consumer wants, perhaps we should also be producing high-tonnage, least cost, leaner cattle to grind up for hamburger.

Our Hamburger Habit

To satisfy the big, and getting bigger, demand for hamburger we face a huge obstacle: the cattle that are finished in feedlots are simply too fat to meet our growing hamburger habit. Or, at least, the meat left over after all the steaks and roasts are cut out, is too fat. And a surprisingly high amount of any carcass ultimately ends up as ground meat. This is true of all species. After all the pricier cuts are removed, 26 percent of a hog, 38 percent of a beef cow, 41 percent of a Holstein and 46 percent of of a lamb is ground up. The trim from finished feedlot cattle is known as “50s,” meaning it’s 50 percent fat and 50 percent lean beef. This fat ratio is too high to sell as hamburger without mixing in leaner products from grass-fed imports or older, leaner domestic cows which, currently, there aren’t enough of.

To solve that problem we import billions of pounds of lean beef from grass-fed cattle from over 30 countries around the world. Just like a carton of apple juice, orange juice or milk, the product that the consumer buys as ground beef could be a mixture of hundreds of cattle.

Ground beef is probably the most utilitarian food known to man; it can be used in a variety of products from Big Macs to tacos to spaghetti. The ground beef used in such meals is typically 80 percent beef and 20 percent fat, or 90 percent beef and 10 percent fat. This is the type of trim found in dairy cows and cattle from Australia and New Zealand. As long as we continue to shoot for an ideal animal that is mid-choice to prime, we will always have this problem of having to import leaner cattle. It becomes especially pronounced now when the dairy industry in the U.S. is flat, and we will be killing fewer beef cows in the upcoming expansion phase of the cattle cycle.

Kevin Good told listeners at this year’s Cattle Fax program at the NCBA convention, “From a percentage perspective, total beef cow slaughter in 2014 was down 18 percent.” He said, “total cow slaughter was down 2.25 million head or nine million head a day. This largely explains why three packing plants, two on the non-fed and one on the fed side, were shut down last year.” Dairy slaughter in 2014 was down 10 percent, which raises the question…where will Americans turn to satisfy their hamburger habit? Sadly, the answer is Canada, Mexico, Australia, New Zealand, Nicaragua, Brazil and Uruguay.

The good news is that hamburger rebounded nicely from numerous recalls and the pink slime controversy and remains wildly popular. The bad news is the biggest beneficiaries might just be our foreign competitors.

We Love Our Burgers

Hamburger is definitely on a big roll…and on a bun and inside a tortilla. While consumption of beef has been in a steep decline, hamburger itself has a much better story to tell. You could say, we are in the midst of a regular burger boom. According to the market research company, NDP Group, “Americans ordered 9 billion burgers last year, up 3 percent from 2013. This increase is especially high at better burger, or fast-casual restaurants, that are known for serving up premium ingredients at quick speeds. Sales of burgers at fast-casual establishments rose 9 percent last year.

Instead of the names you’ve come to expect like Wendy’s, Burger King, Carl’s Jr., Jack In The Box and McDonalds, we’re talking about exciting chains that don’t sell hamburgers made with frozen patties. The new names are The Habit Burger Grill, Smashburger, In and Out Burger, Fatburger and the Shake Shack. The latter is a New York based chain that was started in 2001 as a hot dog cart in a public park and went public on the New York Stock Exchange for one billion dollars. Not bad considering they only have 63 restaurants!

These newer outfits, and others like them, are serving a variety of burgers made from whole muscle cuts. They can do it because their gourmet burgers are selling at prices that are closing in on what used to be steak prices. Ten years ago, average retail steak prices were about 2.5 times that of ground beef. Today, that price relationship has shrunk to 1.7.

Despite the poor economic news we’ve heard from McDonalds, that their sales in the U.S. were off slightly, NPD Group says, “Fast-food burger joints servings rose 3 percent even as visits to these restaurants dropped 3 percent. Helping to prop up that number has been the fast casual segment, which is a subset of fast food.”

One of the reasons hamburger has done so well recently is that some families can no longer afford steak. Randy Blach of Cattle Fax told ranchers attending the Cattle Fax seminar that from the fourth quarter of 2013 through 2014 beef prices increased 22-23 percent. That’s a big shock to the shrinking wallets of most Americans. Steaks are the big loser while those still wanting their beef fix are turning more and more to hamburgers.

This situation created what the NPD Group called a “banner year for beef” in 2014. “Bulk ground beef unit shipments to total foodservice outlets increased by 2 percent. Bulk ground beef case shipments to quick service restaurants increased by 3 percent, and by 4 percent to quick service hamburger restaurants, which drive 70 percent of bulk ground beef sales, and 1 percent to full service restaurants.”

For once, beef even kicked poultry’s tail. The NPD Group said, “The burger category’s gain is the sandwich category’s loss. Sandwich servings overall declined by 2 percent in 2014 compared to 2013, a servings volume loss of 201 million.” Even though Cattle Fax says that hamburger is twice the price of a chicken breast, NPD says that “Grilled chicken sandwiches, which tend to be burgers’ chief competitor, had a servings decline of 9 percent, a loss of 129 million servings. Visits to quick service hamburger restaurants, at which burgers were included in 51 percent of orders, were down 3 percent, though hamburger servings were up 3 percent.”

“The success of burgers in 2014 was a combination of factors,” says Bonnie Riggs of the NDP Group. “Quick service restaurant chains launched new burger items, casual dining restaurants added more burger items to the menu to offset higher beef costs, and Americans simply love their burgers.”

The Better Burger

This past January Fortune Magazine weighed in on the burger bonanza as writer Phil Wahba wrote, “Burgers crushed grilled chicken in 2014 sandwich wars.” He also stated that “the American hamburger is enjoying a golden era, partly as a result of smaller chains like Shake Shack, In-N-Out Burger, Five Guys, Whataburger, and Bobby’s Burger Palace, a chain started by Food Network star Bobby Flay.”

The burger boom is not happening for chains that pump up their burgers with cost-saving fillers. Instead, said Fortune, “fast growing fast casual chains have taken the lead on the fresh perception of customization, which is closer to today’s customers’ definition of quality.” According to Fortune it all has led to the rise of the better burger often made with whole muscle cuts of USDA Prime Angus beef, USDA Choice Angus beef, a blend of both Prime and Choice Angus beef, and blends of whole muscle briskets and chucks.”

The foodies of the millennial generation won’t settle for Big Macs and Whoppers when they can eat burgers like Wendy’s bacon and blue cheese burger on brioche, its pretzel bacon cheeseburger, Carl’s Jr. all-natural burger and other offerings that include fresh bacon, avocados, jalapeño and even peanut butter.

Fresh ingredients, quality food that is good-tasting and affordable…that’s what Americans are demanding and the burger fits the bill.

Ground Beef Nation

Last year cattle economist Don Close issued a report for Rabobank that was very perceptive. The report was called “Ground Beef Nation” and in it Close said, “Changing consumer preferences and a production model tailored to the production of top-shelf steaks has put the U.S. cattle industry in a position of losing market share to competitive proteins. The industry needs to change the way beef is produced in order to remain competitive in the protein market.”

Close continued, “Under the existing business model the U.S. cattle industry manages all fed beef as if it were destined for the center of the plate at a white table cloth restaurant. The industry is, essentially, producing an extraordinarily high-grade product for consumers who desire to purchase a commodity. If the U.S. cattle industry continues to produce ground beef in a structure better suited to high-end cuts, the result will be continued erosion of market share.”

Close also said that the beef industry “is pricing itself off the dinner menu of most families. Average chicken price increases have been about 2 percent a year, while beef has typically increased 5 percent to 6 percent annually.”

Rabobank’s cattle economist had some good advice. “The industry must change to a production model that determines the best end use of an animal as early as possible, in order to compete in a “Ground Beef Nation”. A new system for end-use categorization that influences calf selection, cattle management, production costs and feeding regimen throughout the life of the animal is vital to keeping beef competitive with other choices at the meat counter.”

It has been suggested that America is turning into a two class society…the rich and the poor, with no middle class. It is this middle class that previously made beef the king of meats. But as the middle class disappeared so too did beef’s dominance. Not only has chicken surpassed beef in consumption, some are predicting that pork will pass beef this year. To satisfy this new dual market perhaps the beef industry would be better served by a two-tier structure, one tier producing the CAB type superior product for the high end restaurant trade, the gourmets and the foodies. While another tier would emphasize maximum tonnage, grass-fed beef, low cost inputs, running cattle on increasingly marginal ground, and producing an animal that is leaner with less fat. If we fail to do so, our loss could be our competitors gain and we may awake from this dreamlike cattle market wondering how we lost another 10 percent or 20 percent of our market to foreign competitors.

Green Burgers

There are other reasons to quit treating ground beef like an inferior stepchild. Environmentalists like to say that beef is the most energy-and-resource-intensive ingredient in our diet. But this is based on feeding grain to cattle. Many greenies feel far differently about grass-fed burgers and are enthusiastically buying them at local farmer’s markets to help local ranchers. They perceive ground beef as a great value and a far more ecologically wise choice than steak. They love the fact that grass-fed beef animals are produced solely on grass, with no grain, antibiotics or hormones. Celebrity chefs are grinding up entire animals to produce better burgers, high end restaurants are starting to put hamburgers on their menus for the first time, and some green foodies have even adopted ground beef as the most sustainable, economical, gastronomically flexible and morally responsible cut of meat there is.

When was the last time you heard any of those words associated with beef?

Even more importantly, today’s hassled and harried consumer loves the taste and flexibility that ground beef brings to the dinner table.

Hurray for hamburger!