As important as cattle and cattle markets are, the beef market is the driver of cattle prices. Thus, it is appropriate to gain a better understanding of what happens on the beef side instead of just the cattle side. Hopefully, information can be conveyed in this short article that benefits a reader’s understanding of some of the intricacies of the beef market.

Starting with the most basic information, beef prices are determined by supply and demand for beef items. The cattle industry supplies cattle to packers who then slaughter and fabricate carcasses to fulfill the desired needs of restaurants, retailers and food service. Each of these three purchasers have differing demand. Ground product, filets, New York strips, chuck roast, etc. may be demanded by each of these entities. However, each of these outlets may have a different quantity demanded for each of these products. On top of that thought, there may be some items that only move through one or two of those stated outlets and not the other.

Thinking a little deeper on beef carcass fabrication and demand for individual items, a beef carcass can be cut in many different ways and can produce thousands of different beef items. However, when one specific item is produced, it generally means another item cannot be produced. (The most basic example would be a T-bone steak, which is made up of a filet and New York strip.) Thus, when a packer is cutting a carcass, they must cut carcasses in such a way to meet customer demands for specific products. While packers are doing this, there job is to cut a carcass in such a manner to generate the most revenue and profit from that carcass. This may sound simple to some and more complicated to others, but this is not the only consideration. Beef buyers may have a preference for grade (Prime, CAB, Choice, etc.), size of cut (carcass size), and trim specifications. Thus, packers work to purchase cattle that will produce the items customers demand.

Shifting gears slightly, domestic beef production primarily comes from finished cattle, slaughter cows, and slaughter bulls. Finished cattle contribute 80 to 85 percent of domestic beef production and are the primary source of muscle cuts consumed domestically. However, there is always trim when a carcass is fabricated and this trim is largely referred to as 50-50 trimmings, which means it is 50 percent lean meat and 50 percent fat. It should be noted that any part of a finished animal can be ground, but muscle cuts are generally only ground when the value of the cut is less than the ground product value.

Slaughter cows and slaughter bulls are the primary domestic source of lean grinding beef and they account for 15 to 20 percent of domestically produced beef. There are some lower valued muscle cuts that come from breaking type slaughter cows, but lean grinding beef is the main pull. The lean grinding beef from these animals is generally mixed with the 50-50 trimmings from finished cattle to make anything from 70-30 to 95-5 (lean-fat) ground beef products.

Beyond beef, packers look to extract value from all parts of an animal including the hide, offal, bone meal, blood meal, etc. If they could capture the “moo” and market it, they certainly would, because that generates more value for the industry. The aforementioned items have little value domestically but tremendous value when exported, and the beef industry is known for being efficient and generating value.

This short article has not done the beef industry justice in explaining each and every detail. However, the intent here was not to detail everything, but to bring up some subjects to remind readers the industry is more involved than is generally discussed by cattle producers. Hopefully, this spurs more discussion as cattle producers, industry leaders, activists, and politicians look to criticize segments of the cattle and beef industries.