Rising from the averages: a cattle story

Prime Future 110: the newsletter for innovators in livestock, meat, and dairy

"If the cattle industry is to survive, it must adapt to new customer demands and scientific knowledge to create a better product. The industry's real challenge is to produce a constant product of high quality. Today with fewer than half of cattle grading Choice, we are not producing the kind of product the consumer wants."

Cattle feeding pioneer WD Farr penned those words in the mid-20th century. I think he’d be delighted to know that today more than 90 percent of cattle grade Choice or Prime. How did the switch flip?

WD Farr saw that one of the limiting factors for the beef industry was inconsistency in the eating experience for the consumer. There was no standardized grading system so packers had no mechanism to incentivize cattle feeders and reward them for high-quality, market-ready cattle. He noted:

“The beef industry works on averages. The poor, inefficient animals in every herd drag down the good animals. I do not believe any industry can exist on averages for a long period of time."

So WD and other cattle feeders rallied the industry to support the formation of a national carcass grading system and decades later, we consider the inconsistency problem solved.

Some cattle feeders had a vision, rallied the industry, and put the systems and incentives in place to fix the problem.

Now a generation of cattle feeders see a new set of unsolved problems on the horizon, including reducing greenhouse gas emissions and managing natural resources.

Today we explore the key issues these cattle feeders are seeking innovative solutions to, by exploring why these issues have risen in priority and why they are not simple problems to solve.

First, some background. The Beef Alliance is the group of cattle feeders leading the charge. Its mission is to "support & guide innovation, drive industry-leading research, and engage strategically with industry stakeholders to preserve and enhance the U.S. cattle feeding segment." And they're dialing up those efforts with the upcoming Beef Alliance Startup Challenge, specifically to connect innovators who are solving these gnarly problems with prospective customers and decision-makers, cattle feeders. But more on that later.

Oh, and these new problems are in addition to the ongoing search for tools to improve animal welfare and health, operational efficiency, animal nutrition, and production efficiency that will be high priority forevermore.

There are 5 considerations as we think about that list of problems.

1. Why has figuring out the GHG emissions question become an urgent issue for cattle feeders?

2. High quality + reasonable price + _____ = customer expectations

3. Why is GHG emissions an incredibly challenging problem to solve?

4. In the absence of direct mitigation tactics, can indirect improvements get the job done?

5. AND solutions

Let’s take them one by one. <cracks knuckles>

---

This week’s newsletter is a Sponsored Deep Dive with the Beef Alliance. Here’s my commitment to Prime Future readers as I incorporate occasional Sponsored Deep Dives.

---

(1) Why have GHG emissions become an urgent issue for cattle feeders?

Because reducing GHG emissions is important to their customers. Because packers, retailers & foodservice companies are making boardroom commitments, including:

• Tyson: Achieve net zero greenhouse gas emissions across global operations and supply chain by 2050.

• JBS USA: Achieve net-zero GHG emissions by 2040.

• Cargill: Achieve a 30% GHG intensity reduction across North American beef supply chain by 2030 (measured on a per pound of product basis from a 2017 baseline).

• Walmart: Zero emission by 2040.

• McDonalds: Net zero emissions by 2050.

Keep in mind the perspective of Greg Bethard of High Plains Ponderosa Dairy, "We very much believe if we can produce milk and beef at a lower carbon footprint then we’ll have markets available to us that others will not. And that means opportunity. Whether or not you agree politically isn't the issue, if our consumers want food produced in a certain way and we can do it profitably, then we'd be silly not to do it."

Some quick level setting…

The 3 main greenhouse gasses are: (1) Carbon dioxide, (2) Nitrous oxide, and (3) Methane - largely from manure and enteric emissions. AgNext explains further:

• Direct greenhouse gases from livestock total 3.8% of U.S. man-made emissions.

• Enteric methane accounts for 30% of U.S. methane emissions.

(2) High quality + reasonable price +  _____ = customer expectations

Meat consumers have become accustomed to a consistent experience every time they hit the meat case at their grocery store of choice. That has become table stakes.

And strong demand even at record meat prices has shown just how important animal protein is.  While everyone's sense of pricing is skewed at the moment, safe to say that all things being equal, people prefer to pay less than more...sorry to state the obvious.

But increasingly there are other expectations besides price and quality. Whether it’s animal welfare or lower emissions or how the animal was finished, there seem to be increasing expectations around what's available at the meat case. This isn't new, but it seems to be dialing up and more segments with stronger conviction are doing the dialing....which could/should mean more opportunities for hyper-niche marketing to meet those demands.

But ultimately, it’s an AND expectation of high quality + reasonable price + <insert attribute here>.

(3) Why is GHG emissions reduction an incredibly challenging problem to solve?

This entire space is nascent, it's what I call an 'assumptions on assumptions' situation. In the absence of agreed-upon rules of engagement or when is the baseline year or even baseline measurement methodology or any of the other key assumptions, we end up with assumptions on assumptions which is....tenuous.

There are science and technology questions like having reliable tools to measure at reasonable cost, and then there are the alignment questions of what a win looks like.

And then assuming a GHG emissions win, there's the ultimate alignment question of how the spoils are divided across the value chain.

These are neither easy scientific questions nor are they easy coordination questions.

It will take time. It will take investment. It will take focus. It will take patience.

It will take trial and error.

(4) In the absence of direct mitigation tactics, can indirect improvements get the job done?

We think in terms of financial fixed costs, and the magic that happens when you increase volume and spread those fixed costs out across more units of production. The fixed cost per unit decreases.

But the same concept applies to natural resource use & impact. Where the equation is ‘natural resource usage / total pounds of beef produced per animal’ then the fixed natural resource costs are diluted across more pounds.

It's also funny because when we think about incremental improvements in any given year, they often sound like not much. But when you put them in the arc of history, consistent incremental improvements can be wickedly high impact. The Beef Alliance points out, "Between 1961 and 2018, the U.S. beef industry has reduced emissions per pound of beef by more than 40% while actually producing more than 60% more beef per animal."

The best case scenario is for cow-calf producers and cattle feedyards to have a wide array of tools available to them, those that will directly decrease GHG emissions and those that create an indirect decrease of GHG emissions by improving efficiency.

(5) We need 'AND' solutions.

When the energy in the diet is lost to methane emissions, it's costly for the producer AND it's negative for the environment. So it stands to reason that solutions that reduce methane emissions *could* be good for the producer AND good for the environment.

If increasing soil organic matter by 1% increases the water holding capacity by 3.7%, then it stands to reason that for producers pumping increasingly expensive water to irrigate, that increasing soil organic matter could be good for environmental objectives AND good for the bottom line.

My point here is that sustainability objectives do not automatically imply a financial tradeoff must be made, where in order to satisfy sustainability objectives the producer will have to be worse off financially. I'm not operating with blind optimism and I recognize there could be those situations, but I think its a reasonable expectation that many solutions will be good for the producer and for the environment.

We need to hunt these 'AND' solutions down like the golden tickets they could be....and that's what the Beef Alliance is doing.

This is a space where nuance is critical.

What about the nuance around the fact that for the methane emissions conscience consumer, grain-finished cattle are better than grass-finished cattle. This is such a narrative violation. It's a contrast with the surface-level assumptions about beef production, and it's just one example of how a sustainability objective could turn tolerance of efficiency-creating practices into an open-armed embrace of those efficiencies.

I think good things happen when the right people connect. And by good things, I mean better solutions on shorter timelines. It takes a long time to build a startup, typically 7-10 years. And a large reason for that is the early wilderness years when founders are wrapping their arms around the problem and the market and looking for people to share feedback and insights that could save a founder years spent chasing a misguided solution or sub-optimal early market.

Imagine if you could cut the wilderness years phase of a startup down by 20% or 50% just by getting them in the right rooms with the right people to have the right conversations. For industry, that could mean solving million-dollar problems years earlier than otherwise. That dual benefit is ultimately the objective the cattle feeders have in mind here.

"The Beef Alliance Startup Challenge provided a great opportunity for Resilient to connect directly with industry leaders. It's fantastic to see the biggest players not only supporting new innovation but also designing a conduit for startups like Resilient to interact directly with the end customer. It's clear the Beef Alliance hopes to create an innovation ecosystem to bring forth new technologies that can address critical challenges in the beef industry.  Winning the award served as critical validation for Resilient’s microbiome products and technology, which helps attract outside investors and adjacent industry players that want to support upstream innovation in the food supply chain.”

- Chris Belnap, founder of Resilient Biotics, winner of the 2021 Startup Challenge

If you are a founder working on cattle problems, throw your hat in the ring by applying here:

It seems that progressive producers are jumping in to create opportunities out of their customer's unmet needs as it relates to GHG emissions. These producers that are engaging are playing the long game with an optimistic view, rather than being defensive.

This brings us to one last WD Farr quote that is as true today as it was in the 1990s:

"During the next decade, those who are not willing to be optimistic and forward thinking will be lost in the dust of what promises to be the greatest century the world has ever seen."

What a time to be alive 😉

---

About the Startup Challenge (link)

Rather than waiting for solutions to support cattle feeding to come forward, the Beef Alliance is seeking to support, encourage and drive innovation to help ensure a sustainable cattle feeding segment. The Beef Alliance Startup Challenge is a one-of-a-kind opportunity for the creators of technology (startups) to engage directly with the customers of technology (feedyards) to put high-impact solutions to work.

Companies that meet the eligibility criteria with any product for cattle feedyards are eligible to apply, though preference will be given to solutions in the following areas:  

• Greenhouse Gas Emission Reduction

• Natural Resource Management

• Animal Welfare and Health

• Improvement in Operational Efficiency

• Animal Nutrition and Production Efficiency

---