August 16, 2018

Should Dairy Care About Fake Meat?

 |  By: Mike Opperman

Alternatives to real beef have been around for a long time. Longer than Christianity, in fact. According to a timeline developed by Mother Jones, John Harvey Kellogg created a peanut-based meatless meat in 1896. If you count tofu as a meat alternative, then you can go back to about 200 A.D. when the Chinese created it.

Today, meat alternatives can be found in most grocery stores and on many restaurant menus. It’s estimated that by 2020 plant-based meat could reach as much as $5.2 billion in sales. That’s small potatoes compared to the around $90 billion in beef sold in 2017, but the trend is growing.

Adding to the complexity of the issue is the rise of lab-grown meat, which is grown from animal cell cultures. This may seem farfetched, but the technology has received big-name backing by people like Bill Gates and companies like Tyson and Cargill.

The movement is large enough that the National Cattleman’s Beef Association (NCBA) has taken proactive steps to make sure consumers know the difference between meat alternatives—whether plant based or lab grown—and the real thing. The organization has already sent USDA an outline of key principles for the regulation of these products.

“We’re trying to learn from the challenges that the dairy industry is facing. . .and we don’t want to find ourselves in that same situation,” says Danielle Beck, director of government affairs with NCBA. She says NCBA has advocated for USDA jurisdiction over alternative proteins. They have made sure that the topic is on Secretary Perdue’s radar, and advocated for inclusion of language into a House Appropriations Committee bill that passed out of committee hearings earlier this year that clarified USDA’s jurisdiction over alternative meat products. NCBA has also communicated with USDA, FDA and the Trump Administration to make sure they are educated on the topic.

So what does this mean for dairy producers?

Depending on the year, according to Dale Worener, an associate meat science professor at Colorado State University, cull cows make up between 17% and 19% of the beef supply, and dairy cows account for about 30% of that total. Much of that beef ends up as hamburger, with better carcasses going into rub, loin, round and chuck cuts marketed as steaks and roast destined for lower-priced foodservice outlets. So cull cows, while not prime beef by any means, make up an important part of the overall beef supply chain, especially when it comes to processed product like hamburger.

“When the first burger made from lab-grown meat was unveiled in the EU in 2013, it cost $300,000,” Beck says. “Five years later, that burger is now $11 per patty.”

She says that it’s not hard to imagine that in the future lab-grown meat will be at least cost competitive if not cheaper than real beef. That could also come into play with blended products, for example in a 70% real beef, 30% lab-grown beef product.

Cull cows also make up an important part of the balance sheet. As much as 10% of dairy farm income can come from cull cows, depending on the dairy’s cull rate and current beef prices. In times like these when the milk check is small, the check from cull cow sales can be a welcomed sight in the mailbox.  

Anything that impacts the price paid for beef has an effect on cull cow prices. Therefore, any effect that alternative meat sources has on the overall beef price would also impact cull cow prices. But the potential for growth from the alternative beef market is real.

A recent Rabobank study showed that by 2022, the combined use of alternative proteins—both lab-grown and plant based—in the EU and North America would amount to less than 1% of the combined beef market. That study also predicted that the alternative protein market will grow at a compounded yield growth rate of 8% in the EU, and 6% annual growth rate in the U.S. and Canada eventually reaching 200,000 tons of product.

“While the alternative protein market is less than 1% of the beef market size, that’s a tremendous amount of growth and a ton of product,” Beck says.