LFTB Making A Comeback

LFTB Making A Comeback. I’m Greg Martin with today’s Line On Agriculture.

A few months back there was a major uproar over something called Lean Fine Textured Beef. Everyone from the USDA on down said the product was completely safe but many media types ran with the story and created a major food scare. Rabobank’s Food & Agribusiness Research and Advisory (FAR) group has released a new report that examines potential for LFTB to recover its position in U.S. food supply. Don Close, Vice President, Food and Agribusiness Research & Advisory, Animal Protein.

CLOSE: The first thing we wanted to do with the study was just - that whole topic was so emotionally charged on both sides of the argument that we wanted to give a little bit of time to try as a neutral third party, take a look through both the claims on both sides, what’s true and what isn’t.

The other part was to look at the losses cattle producers are suffering and the erosion of fed cattle prices since the whole fiasco broke. Along with the narrow margins that packers are working with, Close says that when you take the combination of the two - we simply don’t have the luxury to waste 2% of our beef supply. But you just can’t immediately start using LFTB again.

CLOSE: What would bring this back into favor in time - we tried to give consideration to the severe contraction of total beef supply that we’ll be looking at over the next year and a half to two years and we think as that supply contracts and prices increase that it will cause this whole topic to be viewed in a different light.

2% doesn't really sound like much but Close says it’s actually a major impact.

CLOSE: Just at the time window we looked at in the study, the weekly Dow Jones price series we saw a 26-cent increase in lean ground beef prices to consumers. We saw a total of a $9 decline in fed cattle prices with $6 of that 9 attributable to the decline in both 50 and 33% blends so clearly you had a negative impact in total cutout value that was immediately passed through to cattle feeders

In addition a reduced tonnage of total product and higher consumer prices.

CLOSE: Throughout this whole ordeal the USDA has repeatedly stated the product is wholesome, it has food safety and it is an economical means to increase the lean point on ground beef and I think that while our conversation focused on attempts and efforts by industry I think we’ll continue to have that reinforcement from USDA that the product is sound.

That’s today’s Line On Agriculture. I’m Greg Martin on the Ag Information Network.