Animal Identification

WEMC FS#7-04 • Fall 2004

7-17-17-17-17-1

Some Issues Related to Beef Traceability:Transforming Cattle into Beef in the UnitedStates

James G. Robb,James G. Robb,James G. Robb,James G. Robb,James G. Robb,DirDirDirDirDirectorectorectorectorectorrobb@lmic.info

Erica L. Rosa,Erica L. Rosa,Erica L. Rosa,Erica L. Rosa,Erica L. Rosa,AgriculturalAgriculturalAgriculturalAgriculturalAgriculturalEconomistEconomistEconomistEconomistEconomistrosa@lmic.info

Livestock MarketingInformation Center

Denver, Colorado

OverviewThe technological steps used in transforming live cattle into consumer beef items and

the nature of wholesale beef prices present some interesting issues regarding the traceabil-ity or the maintenance of identity throughout the beef packing process in the UnitedStates. These limitations are sometimes overlooked when policy makers, agriculturalproducers, retailers, and restaurants discuss animal identification.

A steer that enters a packing plant is transformed into many different products. Thisfact sheet provides a description of the beef packing steps and highlights the nature oftraceability, focusing on the difficulty of maintaining animal identification (ID) in thefabrication process. Next, the nature of wholesale prices is briefly discussed to indicatethe large differences in value of major carcass components. In recent years, data availablefrom the USDA Agricultural Marketing Service shows how beef carcass component valuesvary due to beef quality grades and marketing approaches such as branding. Traceabilityis potentially a new market characteristic at the wholesale level.

BackgroundOver the past 30 years, the U.S. cattle and beef industry has undergone significant

changes in the production, processing, and marketing segments. Retail and foodservicecustomers have driven many of these changes. A key development in the cattle/beefindustry often overlooked is how beef is marketed today at the wholesale level. Not longago the beef industry was considered a carcass-based industry, in that much of the beefwas marketed to retailers and further processors in full carcass form. Today the majorityof beef marketed by packers is traded in cuts derived from the primal (i.e. rib, chuck,round, loin, etc.) and sub-primal sections. Once the carcass has been processed, cuts areassembled, typically from several carcasses, and are boxed in preparation forshipping to retailers and food service buyers. More recently, some retailers

7-27-27-27-27-2

now buy beef products from packers in caseready form. Additionally, more and more beefproducts sold to restaurants and other foodservice institutions is pre-processed andsometimes fully pre-cooked.

This modern U.S. beef processing andmarketing system is a major contrast to themuch more traditional production systemsthat dominate other regions of the worldwhere traceability from farm to retail con-sumer has generally moved forward morerapidly than in the United States, specificallyin parts of Europe and Japan. In those coun-tries, carcasses are often the packer’s endproduct with a traditional butcher processingthe carcass into consumer cuts. A typical U.S.beef slaughter facility is much larger withhigher capacity than in other countries. Addi-tionally, the U.S. packer typically purchasescattle from a rather large geographical area andtransports the end-product long distances todomestic population centers and to foreigndestinations.

These changes in the U.S. beef industryhave been associated with a variety of eco-nomic and technological factors. The U.S.packing industry can be described as a lowcost, high volume business. A rather highproportion of costs are fixed in the form ofplant, equipment, etc. That is, they are noteasily adjusted, and processing a high volumeis key to maintaining low total costs. Thepacking/processing sector of the beef industrycan also be described as relatively concentratedin terms of the number of firms involved(Ward, 2002) and the geographical location ofthe firms (beef packing plants tend to belocated near the areas where feedlots are

concentrated, especially in the High Plains).In general, the processing sector of the beefindustry mass produces high quality and verysafe beef products. In the context of imple-menting traceability systems and policy, howthe processing sector operates in the UnitedStates may help identify issues and constraints.

Some Details of the ProductionProcess

The majority of cattle for slaughter aremarketed by feedlots to a packing (meatprocessing) company. Feedlots typicallyidentify and group (or sort) cattle based on avariety of physiological characteristics such asframe size, breed, sex, in-weight, and expecteddegree of finish at the time of the sale. Dur-ing the feedlot stage, cattle may be sortedagain, and prior to offering, they are some-times re-sorted.

When negotiating the purchase price ofslaughter cattle, delivery specifications such asdate are usually defined. Upon arrival at thepacking plant there may be some sorting ofanimals. But usually sorting becomes moresignificant during the initial and subsequentinspection processes (live animal health inspec-tions and the sanitary and meat evaluationinspection processes).

Transforming cattle into beef is oftendescribed as a disassembly process. A generalschematic is provided in Figure 7-1 (note thewide arrows that indicate cattle, carcass andmeat flow). Disassembly is a good descriptorof the beef packing process and highlights thecontrast of this business with most othermanufacturing processes. For instance, mostmanufacturing processes construct products by

7-37-37-37-37-3

putting pieces and parts together, but packerstake a complex unit, a carcass, and take it apartto create their final product. The end-prod-ucts of a modern beef packing plant are boxesof cuts (e.g., tenderloin, chuck, top round,strip steak, beef trimmings for hamburger),not whole carcasses.

The first major packer operation (Stage 1in Figure 7-1) involves slaughter or harvest ofthe animal. Then the hide and internal organsare removed and a carcass is left hanging(hooked to a trolley transportation system).Carcass evaluations and inspections are thenconducted. Next the carcass is moved to acooler.

At the cooler (Stage 2 in Figure 7-1) thetemperatures of the carcasses are reduced andcarcasses are stored (meat locker). Coolersorting for specific carcass grades and othercharacteristics (e.g., size) is common. Afterchilling and sometimes additional ageing,batches of carcasses are scheduled for furtherfabrication (disassembly).

The fabrication stage (Stage 3 of Figure 7-1) is often referred to as the “fab floor.” Thisstage is not a linear process. First carcasses aremade into large primals (i.e., quarters of thecarcass). Parts of carcasses move in differentdirections throughout the fabrication facilitywhile being further cut, trimmed, sized, etc.Many specialized butchers work on differentparts of a carcass, and processing involvescrisscrossing carcass components and productsto many people in different locations. At each

cutting stage, trim from the process is col-lected from many carcasses. At the end of thefabrication stage, for example, cuts fromseveral carcasses are combined into boxesaccording to standard industry specifications,such as size, quality grade (e.g., Prime,Choice, and Select), and increasingly to pre-specified purchaser or special program specifi-cations.

At the final stage in a typical U.S. beefpacking plant (Stage 4 of Figure 7-1) boxes ofcuts are moved into coolers prior to transpor-tation to end users (retailers or food servicecompanies). Each packer sells a whole rangeof cuts, portion cuts, and quality grades. Forexample, USDA’s Institutional Meat PurchaseSpecifications (IMPS) lists about 30 beefproducts for the loin, each with four standardweight ranges and 20 “portion cuts” productsfor the loin. IMPS also lists products from thebeef round in four weight categories. Inaddition to standard meat cuts, many packersalso sell branded and further processed prod-ucts.

Often the beef is not yet sold at the finalstage in the packing process. So the packermay not know who the buyer will be. There-fore, throughout the production process, thepacker will often not know if the buyer isinterested in or willing to pay for traceability.Consequently, some firms view beef traceabil-ity as an “all or nothing” situation for aparticular production plant, meaning thatevery product is traced or nothing is traced.

7-47-47-47-47-4

Figure 7-1. Schematic of Wholesale (Packer) Sector Stages and Linkages

Feedlot Slaughter orHarvest

Cooler

FabricationFloor

Cattle are sortedaccording to variousspecifications suchas breed, degree offinish, and liveweight.

Holding Coolerand Shipping

Stage 1Animal processed intocarcass; hides areremoved, etc.

Stage 2Carcasses are sortedand assigned intobatches.

Stage 3Batches are brokendown into primals,sub-primals, andcuts; products areboxed.

Stage 4Boxes are sorted thenstored or transported(usually byrefrigerated packer-owned truck).Diagram Legend

Cattle, Carcass and Meat Flow

Continuous Traceability and Identification Flow

Packer Operations

Retailer and/orFood Service

7-57-57-57-57-5

A Challenge for Traceability: TheFabrication Stage

Individual animal ID has emerged as oneof the key issues confronting today’s beef andcattle industry. ID is also part of the broaderissues of traceability from producer to con-sumer (Bailey, 2004). Assuming ID is inplace, what happens next?

The National Animal Identification System(NAIS) is often referred to as a “live animal”traceback system because this identificationapproach typically stops during the initialstages of the packer operations. That is, asystem must move beyond live animal orwhole carcass ID to allow traceback of a beefproduct from a consumer’s plate or retailestablishment to the farm gate. As discussedin the previous section and as shown in Figure7-1, the nonlinearity of most beef packers’fabrication production stage causes a discon-nection between an individual carcass and theresulting beef products.

Tracking products within the packingprocess is an ongoing and rather routinebusiness practice. Traceability implies thatinformation and tracking flows both forwardwith the product and can also be followedback to previous stages in the production/marketing system. Of course, many plantshave made substantial investments in technol-ogy to implement aspects of traceability.Figure 7-1 (note the dashed arrows) depictswhere continuous traceability and identifica-tion can be achieved with technology invest-ments.

For an animal carrying an ID system, somepacking plants will transfer pertinent data toan electronic data device attached to the hook

that carries the carcass. This system providestraceability beginning at slaughter and, withcomputer software, back to the feedlot oforigin. Since the carcass stays on the samehook, traceability can be maintained to thecooler.

However, as the carcass goes to the fabri-cation floor (Stage 3 in Figure 7-1), lineartraceability of one animal from the time itbegins fabrication to the time it becomesboxed beef is a problem in modern, large-scalepacking operations. The rapid reduction ofcarcasses into many beef products in differentparts of the fabrication floor and the commin-gling of like cuts from different carcasses tocreate consistent boxes of beef cuts andproducts makes direct tracking of productsback to an individual animal/carcass or farm-of-origin during the fabrication process almostimpossible with current processing systemsand animal ID technology. Plus, the finalproduct (boxed beef) usually contains prod-ucts from one to many different carcasses.Therefore, at the processing stage the directtraceability link established through individualanimal ID is broken once the carcass is fabri-cated and cuts from other carcasses are com-mingled.

However, at the fabrication stage otherrecord keeping linkages are possible with priorand subsequent stages in the productionsystem. For example, instead of linear flow ofindividual animal identification, groups ofcarcasses could be traced through the fabrica-tion floor based on time and batch. That is, asystem of time and date indicators (e.g.,stamps) can be associated with this stage. Sothe carcass and final box are traceable within a

7-67-67-67-67-6

group or batch. However, getting an exactlink back to an earlier stage of the productionsystem is not typically done. Processors whocurrently use this system are able to deal withproblems such as food safety concerns for awhole batch of meat products; however, theyare not able to trace the meat back to thefeedlot or an individual producer. Thus, thebatch traceback system is helpful in the case offood safety related meat recalls that occurredat the processing level, but it does not help ifthe concern was related to a live animal dis-ease.

The product the packer sells is a box ofbeef cuts. At the completion of the fabricationstage, labeling and full individual linear trace-ability can potentially be resumed. In fact,many packing plants have already made invest-ments in this technology. The final productbox is labeled (with a bar code, for example),and throughout the holding and shippingprocess (Stage 4 in Figure 7-1) instant updatesare available regarding location of the productand the capability of traceback to the fabrica-tion batch would be possible.

Aspects of Beef Wholesale ValuesTraceback of meat products to individual

carcasses and farms-of-origin may be difficult,but technology may soon be developed thatmakes the traceback process more and morefeasible. In order for the technology invest-ment to occur, there likely needs to be aneconomic incentive for the processor (orsomeone else downstream in the supply chain)to invest in the technology necessary toprovide individual animal and producttraceback throughout the supply chain. A

question then exists regarding what economicincentive is there for a processor to invest intechnology allowing traceback of beef prod-ucts to the original carcass. When buyersdesire product attribute verification or themaintenance of identity, there is increasedinterest in full traceback (Curtis, 2004). Forsome beef products, branded items alreadybring a premium, and branding impliestraceback at least to the packer. Those inter-ested in maintaining identity preservationthrough the packer stage need to understandhow values differ within and between car-casses.

The major indicators describing thewholesale market are the boxed beef cutoutvalues. The boxed beef cutout value is anaggregation of individual meat cut pricesdesigned to estimate an average carcass-relatedprice at the wholesale level. These values arecalculated by USDA’s Agricultural MarketingService (AMS) and include several valuesrepresenting Choice and Select wholesalevalues.

In 2002, as part of Mandatory PriceReporting legislation, AMS introduced theComprehensive Boxed Beef Cutout Report.Unlike the boxed beef cutout, the comprehen-sive report is based on all sales of Prime,Choice, Select, Ungraded (cuts, grinds, andtrim), and Branded beef that are sold on anegotiated, formula, forward contract, otherdomestic, or export basis. Beginning in April2003 AMS began to report the individualprimal component cutout values (Prime,Branded, Choice, Select, and Ungraded) ofbeef in this weekly report.

7-77-77-77-77-7

Analysis of the Comprehensive Boxed BeefCutout value data provides information on thepricing of meat in the wholesale beef marketand shows that beef cutout values vary greatlydepending on grade, branding, and the part ofthe carcass the beef comes from. Figure 7-2shows recent average wholesale cutout valuedata for various grades of boxed beef. Addi-tionally, Figures 7-3 and 7-4 show separatecutout values and for two key primals, the loinand the chuck, respectively.

In comparing the different quality gradesof the beef cutout values (Figure 7-2), thePrime cutout value consistently has the highestvalue among all the other quality categories ona monthly basis, but only a small percentage ofbeef is of Prime grade. This represents thedistinct premium received for Prime gradedbeef, most of which is purchased by upscalerestaurants. Branded beef is the next highestprice category, followed closely by Choice.The Select grade has a slight value premiumover the Ungraded cutout, as shown in Figure7-2. On the other hand, further statisticalanalysis concluded that the Select and Un-graded cutout values are not significantlydifferent in terms of value in the wholesalemarket (Stone, 2004). However, this relation-ship does not hold true for many of theindividual primal (chuck, loin, rib, round)quality grade cutout values.

Certain products such as a Prime gradedloin receive a substantial premium; whereas itappears there is no market incentive to pay apremium for a Prime graded chuck, round,brisket, or flank in the wholesale market. Thisfinding is not surprising, given that manyhigh-value beef cuts are derived from the loin

(i.e., tenderloin). Similar to many of theindividual primal component cutout values,there is distinctive difference between thevalues for Select and Ungraded loins (Figure7-3). Overall, these are also the lowest valuedand, thus, the least desirable quality grades forthe loin. This relationship is also exhibitedwhen comparing across quality grades for theprimal rib.

Figure 7-2. Selected Wholesale Beef Cutout Values

Figure 7-3. Selected Wholesale Beef Values - Loin

7-87-87-87-87-8

With exception to the loin and rib primals,Prime is not always the highest valued qualityfor many of the remaining primal cuts. Forexample, the Branded chuck primal commandsthe highest value of the quality grades fol-lowed by Prime and Choice chucks (Figure 7-4). Of note, it appears that there is not muchof a difference between the Prime and Choicechuck in value terms. As expected, the Selectand Ungraded quality chucks are not statisti-cally different when assessed over time. How-ever, on a monthly basis Ungraded chuckshave often had a slight premium over theSelect graded chucks. Similar relationships canbe found for other relatively low-value beefitems such as the short plank and flank (Primeand Select have essentially the same value).

The carcass cutout value is heavily drivenby those few key primals where quality com-mands a premium; in particular, the Prime andChoice loin and rib primals account for muchof the overall wholesale value. These primalsare a rather small percentage of a carcass(about 25% of the carcass). At the wholesalelevel, differentiation of beef cuts by brandingand meat quality grade of relatively low valuecuts (about 75% of the carcass) has not addedmuch value, if any, for several major products.The question remains whether traceability canbecome an economically important value forbeef items, especially for relatively lowervalued items.

SummaryThe nonlinear flow of the beef through

the fabrication process is why it is relativelydifficult to trace a specific beef primal or beefcut back to an individual carcass, animal, orproducer with most of the current beef pro-

Figure 7-4. Selected Wholesale Beef Values - Chuck

cessing facilities. Thus, the same modern U.S.processing technology that allows carcasses tobe efficiently turned into beef products causesindividual product traceback to the originalanimal or farm to be difficult and potentiallyextremely costly. This disconnection betweenthe farm-of-origin, live animal, carcass and itsbeef products is why the NAIS is referred to asa “live animal” identification and tracebacksystem versus a complete “beef” or “meat”traceback system. The question still remainswhether the economic incentives (marketaccess or consumer driven) exist to driveprocessing plants to invest in the developmentof new individual animal ID technology thatwill facilitate farm-to-fork traceback. Otherfact sheets in this series further discuss whetherthere is a consumer or market incentive fortraceback systems beyond the NAIS.

7-97-97-97-97-9

ReferencesBailey, D. “Benefits and Costs Associated with

an Animal Identification System for Cattlein the United States.” Western ExtensionMarketing Committee Fact Sheet. WEMCFS#2-04. Fall 2004.

Curtis, K.R. “Animal ID: Opportunities forValue-added Marketing and ProductionEfficiencies.” Western Extension Market-ing Committee Fact Sheet. WEMC FS#3-04. Fall 2004.

Stone, K. “Comprehensive Boxed BeefCutout: Data, Analysis and Comments.”Analysis and Comments. Livestock Mar-keting Information Center, Letter No. 29,July 13, 2004.

Ward, C.E. “A Review of Causes for andConsequences of Economic Concentrationin the U.S. Meatpacking Industry.” Cur-rent Agriculture, Food & Resource Issues.3(2002):1-28.