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Texas Agriculture Archive

September 20, 2002

Cattlemen, McDonald's
meet over imported beef flap

By Mike Barnett
Editor

A McDonald's official met with a roomful of skeptical cattlemen at the Texas Farm Bureau state office in Waco to listen to the company's explanation of why they began a pilot program in the Southeast to purchase lean, foreign beef to mix in their hamburger products.

At the end of the explanation by John Hayes, McDonald's director of U.S. Food and Packaging, the president of the state's largest farm organization, with one caveat, was will ing to give the fast-food giant the benefit of the doubt.

"I know that in listening to what he has to say, if you take everything at face value, you'd say McDonald's is a friend of the American cow/calf operator," said TFB President Donald Patman. "Now that's if you take everything at face value."

That was good enough for Hayes, who also made presentations to FB members in Victoria and Abilene.

The decision by McDonald's to begin a pilot program in 400 stores in the Southeast earlier this year sparked a cattle industry storm that continues today. Hayes told the Central Texas cattlemen he was in Texas to dispel myths and misconceptions, and to solicit the industry's help in solving what he termed a very real problem: a growing shortage of lean cull cow beef.

"You're mad at us. I understand," Hayes said, noting that McDonald's is the single largest purchaser of U.S. beef. "But once you're done being mad, then we need to work together to find a solution. McDonald's is determined that the first choice, our best choice, is to buy product from this country.

"But you have to help us. The market has to be able to provide the source of supply to be able to meet the demand of the consumer. It's the consumer coming at you through us."

Hayes attributed the cull cow beef shortage to a number of factors.

Historically, McDonald's and other fast food chains have used a combination of 60 percent cull cow beef and 40 percent fed beef fat trimmings to meet the taste profiles of their products.

"If you look at the cull cow beef that was available in the late '70s when we had 1,500 restaurants, we were processing something like 10 million animals (industry-wide)," Hayes said. "Today, this year, even with the drought bringing in more than expected, we're only going to process about 5.4 million, maybe 5.5 million animals. And at the same time, McDonald's has 15,300 restaurants, as well as our other competitors who rely on that as a source of raw material, have greatly increased as well."

This is only part of a tremendous new demand for cull cow product, which has trended steadily upward for the last four years, he noted.

The consumer is another reason for a cull cow shortage because they want a leaner hamburger product. Hayes said nearly 50 percent of the red meat consumed by the American public is hamburger. And increasingly the traditional 75 lean/25 percent fat ratio has turned into 85, 90 and 95 percent lean as consumers seek what they deem a healthier product.

"What we're seeing is a tremendous change, not only in the number and supply of the animals, but more importantly in the demand by the consumer that wants this very lean ground beef product," Hayes said. "And the only way you're going to get from an 85, 90, 95 percent lean product is you have to put something else in it. And typically, the something else, more and more now, is becoming the cow meat product.

"It's a tough sell when you guys are taking animals in and get nothing for your animals...and I'm telling you there's a shortage...and you're thinking how can that be if we can't get any kind of return on our animals."

Hayes told the cattlemen to compare what he paid for 90 percent grinding lean before the collapse of cattle prices earlier this year to what he paid five years ago.

"You'll see that people that are buying this product are paying almost 25 percent more for that product than we were five years ago," he said. "And if you look at what we pay for cull cows...those are on an upward spiral, too."

To those that charge McDonald's is chasing a cheap buck in buying foreign meat, Hayes replied that the company has invested an additional $185 million over the last 15 years to purchase domestic beef over cheaper imported beef.

"That's what it cost us to pay for our belief in supporting the local market place," he said. "That's why we pay in terms of the higher cost when our competitors stampeded toward the imported product."

Still, he said, with the cowherd continuing to decline, a bad situation is only going to get worse. Sooner or later herd rebuilding will start, resulting in even fewer females going to market.

The trend of higher demand and the prospect of fewer cull cows has the fast food giant searching for answers. Thus, the test in 400 Southeastern restaurants, where the supply of lean domestic beef is being supplemented with small quantities of imported lean from Australia and New Zealand.

"This is a long-term test," Hayes explained. "But should we decide to go forward, it's just saying that McDonald's has access to all of the components in the marketplace."

Hayes responded favorably to the idea of a grass-fed beef industry as a future source of lean beef.

"You have to understand the magnitude here," he said. "We're talking somewhere in the millions of animals. But it starts here. If we've got to form some kind of alliance to get people to produce more of this kind of animal we need, we're open to any discussion."