What must be true for grass fed beef to scale?
Prime Future 045: the weekly newsletter highlighting trends in livestock & meat
Two recent conversations have me thinking about grass fed beef and specifically, what needs to be true for grass fed to become a meaningful segment in the US?
Some industry folks might already be rolling their eyes at the question, thinking of how inconsistent the grass fed eating experience is, how much more resource intensive it is than grain fed, why it cannot happen at scale in the US, etc.
But, where there's a market there's a way. My favorite example, why did the US poultry industry so rapidly flip 50-60% of production to No Antibiotics Ever? Because companies like Chick Fil A, with significant buying power, said this is what we want. So the industry had incentive and urgency to figure out how to make it work. Actually that's wrong....it wasn't that "the industry" had incentive, it was that Chick Fil A suppliers had the incentive to start figuring out how to make that paradigm of production work. And then the learnings spread among producers as the marketing claims spread among food companies.
Perhaps we are nearing a similar market signal in the beef market, albeit at a much lower volume than the poultry example, that there is demand for US produced grass fed beef. In a recent conversation Mike Salguero, CEO of ButcherBox, shared their aspiration to source grass fed beef from the US, but in the absence of a scaled grass fed beef sector, ButcherBox sources from Australia & New Zealand. Not an uncommon story in grass fed beef.
(Note - I am not here for a debate on the superiority of grass fed or grain fed. Call me an opportunist but I'm on the side of markets, of producing to high value markets or high volatility markets, whichever you fancy. I'm on the side of asking what needs to be true in order for this new idea to work. And when I cut into a Ribeye, I'm on the side of great marbling.)
So why has grass fed beef not scaled in the US? Well, grass finishing requires more land and time and all the resources per animal, which is why it costs more per pound of meat.
The more important question is, what needs to be true in order for grass fed beef to be viable at scale in the United States? Let me know your thoughts, here are my hypotheses:
Grass fed animals need to finish, to be market ready, in a comparable amount of time with grain fed animals.
Grass fed animals need to have a comparable resource footprint as grain finished animals.
The eating experience of grass fed beef must be consistently good.
Basically none of these things are true today. Today. Under current paradigms and capabilities and available tools.
By no means do I make light of the gap between current state and what's outlined above, but the next critical question is, how do we make those things true? What are the innovation dials that can be turned?
Genetics. Cattle genetics in the US have been optimized for grain finished animals. If genetic selections were made with grass finishing in mind, how could that change the cost structure of grass fed meat in 5 years? 10 years?
Nutrition. This is pure speculation, but as we learn more about the gut microbiome and the soil microbiome and the plant microbiome....will it turn out that all of those elements be tied together to improve nutrition for cattle finished on grass? Or, at a minimum, how does any one of those elements impact cattle nutrition?
Cattle Management. Any cattle feeder can tell you the feed to gain ratio for any given pen, it's a key metric that is easily tracked and measured. Not so for finishing cattle on grass! The metrics that enable effective management are not available to graziers, which makes precision management much more challenging. More on this in a moment.
Pasture Management. Just as row crop farmers are beginning to manage fields in granular units as a result of precision farming tools, how can a 20,000 acre rancher in Montana reasonably & more profitably manage pastures at a more granular level than by the section (640 acres)?
TECHNOLOGY
Allan Nation, the author of Land, Livestock & Life: A Grazier's Guide to Finance says that graziers must manage 3 inventories: cattle, grass, capital.
My hypothesis is that we could be on the cusp of tech enabling a transformation in how each of those 3 are managed. Examples include:
Software to manage herds and pastures (aka feed inventory)
Hardware like smart tags or smart scales to monitor animal behavior, even grass feed intake to enable better management of cattle and pastures.
Virtual fencing to enable rotational grazing and true precision pasture management. Frank Wooten, CEO of Vence (virtual fencing startup), joined me to talk use cases & value proposition around virtual fencing in a podcast.
Mike Salguero of ButcherBox also pointed out that one of the issues they've identified as a barrier to producers finishing cattle on grass is that most operating loans for producers are for 12 months - grass fed producers need longer. Are there fintech plays that can line up the right capital structures here?
I'm bullish on some combination of these technologies enabling a new view on what’s possible as it relates to grass fed beef....or whatever other production systems for which there is a market.
Two related strategy ideas:
(1) INFINITE GAMES
In The Infinite Game by Simon Sinek, the big idea is that a basketball game or other sporting event has a defined end point - whoever has the highest score at the end of the pre-determined time period, wins. The other team loses. Game over. But business is an infinite game. Sure there's reporting at the end of a quarter or the year, but the game goes on. The game goes on as long as the business can keep playing, can stay in the game.
I say that because there isn't a grass fed vs grain fed finite game. Not to get existential, but the infinite game is about producing high quality beef that meets customer preferences and willingness to pay....whether that means finishing cattle on grass, grain, or kombucha. Where there's a market there's a way.
(2) ALL BUSINESS IS....
A friend of mine loves the phrase "riches in the niches". It sounds funny, but you can find examples in any industry, including agriculture.
Another friend can't get enough of low margin, high volume businesses. He'd take a commodity market play any day over a premium market.
Which one is right? Both, obviously.
Which makes me think....if it’s true that “all business is bundling & unbundling”, maybe the adaptation to that idea is that all agriculture is scaling & differentiating. There's a premium in a low volume niche until it begins to happen at scale and the premiums are competed & commoditized away, and then the premiums are found in a new niche. And so the cycle goes, infinitely.
New Future of Agriculture Podcast Episode!
Check out the podcast episode with Frank Wooten, CEO of Vence, a virtual fencing company about their technology and why it could impact the cattle industry in multiple ways. (LINK)
While you're at it, I highly recommend signing up for the new weekly newsletter published by Tim Hammerich, host of the Future of Agriculture podcast. (LINK)
Volume 1 of Prime Future is now available in an ebook
My hope is for this PDF to be a valuable go-to resource on all things animal agriculture & innovation. Let me know what you think!
Great piece, Janette.
To your question about scale barriers:
- Time & resources boil down to cost, so we can apply classic supply/demand. A whole series of articles could be written about the different factors of S/D at play here. Substitute goods - cultured meat - being a oft-ignored giant, but many others are significant, too - declining ethanol demand, environmental regulation, tech-enabled transaction cost reduction, etc. We could go on and on.
- Eating experience is the barrier that seems more difficult to pin down. There isn't a single opinion on how beef is supposed to taste, and might forage-based production systems have some level of irreducible variability?
Check out Alder Springs Ranch, Glenn and Melanie Elzinga would be a great interview.