Why Are We Here? Driving Forces for Process Verification Programs Ted Schroeder Professor of Agricultural Economics Kansas State University [e-mail] www.agmanager.info

1
Why Are We Here? Driving Forces for Process
Verification ProgramsTed SchroederProfessor of
Agricultural EconomicsKansas State
Universitytcs_at_ksu.eduwww.agmanager.info
2
U.S. Beef Demand Index (1980100)
3
U.S. Chicken Demand Index (1991100)
4
Markets at each stage coordinated chain, but
system worked poorly
- highly varied product - little price-quality
distinction - no incentives to improve 1 in 5
quality steaks were too tough to chew!
5
Consumers Want Meat Products

• 1. Tender
• 2. Flavorful
• 3. Consistently High Quality
• 4. Convenient to Prepare
• 5. Healthy Nutritious
• 6. Safe
• Competitively Priced
• U.S. beef production and marketing system failed
  to provide these basic requirements

6
Ways to Improve Coordination

• Vertical integration
• vertical ownership - chicken model
• Vertical cooperation
• contracts
• marketing agreements
• partnerships
• alliances

Verification of processes
7
1. Fresh Branded Case-Ready Products
Branded beef used to be nonexistent Now common
USDA has 50 beef certification programs
8
Retail Steak Prices
Ribeye Steak Prices in Kansas City April 1, 2000
Source Lusk
 
9
2. Meal Packages
Single dish quick fix meal consumer expenditures
expanded 83 in 2001 to 141 million AC
Nielsen 472 beef products introduced in
2001 Compared to 70 in 1997 - NCBA
10
Heat Serve Protein Sales Growth
Total heat serve Protein sales went from 342
to 740 million. Beef sales tripled
11
3. Food Service
Food service continues to grow Diversity of
product needs Quality control in volume are
critical Contracts
12
What do they require?
Product integrity High level of accountability
of input supplier Product safety assurances
mega responsibility/risk Production practice
assurances (including location?) Traceability Co
nsistent continuous supply Many Credence
characteristics
More Intense Process Certification