Local Beef, Local Profits
In Kentucky, Kroger likes to tell its customers local ground beef just got easier to buy. It's also gotten more profitable for producers here, thanks to a start-up program through the Kentucky Cattlemen's Association (KCA).
"I couldn't have been happier," says Harrodsburg, Kentucky, cattleman Cary King. He sold four open cows to the program in May at an average price of $1,022 a head. "I've taken cows to the stockyard and gotten $720, and been pleased."
KCA's entry into the retail beef market, under the label "Beef Solutions," officially kicked off in March 2018, when the brand hit Kroger's meat cases.
Dave Maples, executive vice president of KCA, recalls the directive from Kroger meat merchandisers: "We want a local Kentucky beef product. Our consumers are asking for it. You have the connections, you put it together."
A WORKING MODEL
Maples and Becky Thompson, director of Kentucky Beef Network (KBN), put the issue to a vote with their boards of directors. After a resounding "Yes," the two put their assets on the table—some 1.1 million cows, making Kentucky the largest cow/calf state east of the Mississippi River.
Next, they had to find a harvest facility and packager. Kroger, like most major retailers, insists on Global Food Safety Initiative (GFSI) certification, much like Beef Quality Assurance (BQA) protocol for packers and processors.
At the time, the nearest GFSI-certified harvest facility was in Michigan. But, a commercial packer in Hazel Green, Kentucky, called The Chop Shop, was willing to go through the certification process, as well as make facility renovations to meet GFSI specs. It also had to get a third-party animal-welfare audit using American Meat Institute standards.
Thompson notes the company already had the cooler capacity, refrigerator trucks and a lot of the tools it needed to make the Beef Solutions brand a reality. It could even track all the beef electronically and test each combo pack of beef for E. coli. In addition, it had the capacity to grow. So, while Beef Solutions averages 13 market cows to the facility each week, The Chop Shop has the capacity for 300 head a week.
"They are in eastern Kentucky, in the mountains," Thompson adds. "They are creating new jobs for local young people. It is wonderful for that community and great for the state."
Next came the packager, Creation Gardens, of Louisville. It had the know-how when it came to grinding and packaging beef, but it lacked some of the vacuum-packaging equipment needed.
It worked with the Kentucky Agricultural Development Fund to get a low interest loan and now has the specialized equipment. Even better, it is literally across the road from Kroger's Louisville distribution center.
The KCA was also an important asset to the success of the program. With a dream team of 13 employees, it tirelessly worked out supply-chain details and conducted focus groups with consumers to create the best possible packaging and labeling for the product.
Per Kroger's request, the ground beef is 80% lean and 20% fat, and is sold in 1- and 2-pound packages. The 2-pound package contains four half-pound, preformed patties. KCA staff research led to the idea of the patties being sold in easy-peel packages. Thompson says, "this means there is minimal touching getting them from the package to the grill. That's a big thing with consumers."
The beef itself is a whole carcass grind from open cows. "We have gotten very, very good feedback from the consumers," Thompson adds. "We grind what would be steaks into one product." Kroger prices it at $5.99 per pound, which Thompson says is competitive with products like Laura's Lean Beef but more expensive than generic ground beef.
For their money, consumers get quality and traceability. Producers enroll cows they intend to market into the program. They must own the cows at least 60 days prior to marketing and can use calving records or purchase receipts to meet that requirement. They also agree to Beef Solutions Gold Standard Program, which includes Beef Quality and Care Assurance (BQCA) certification.
When cows are enrolled, they receive an orange tag with a unique number and are assigned a delivery time and shipping form. The tag request form includes withdrawal times. At delivery, a bar code on the program-compliant ear tag is scanned at The Chop Shop and entered into its system as a carcass identification number.
PRICES AND TRANSPORT
Beef Solutions sets prices based on high dressing boner rates found on the "Kentucky Weekly Livestock Summary," generated by USDA reports on Mondays. Cattle are delivered and harvested on Fridays.
Producers receive hot carcass weight (HCW) minus cost of the tag ($1.50) and state and national beef checkoff fees ($2). They are responsible for transportation costs to The Chop Shop. Thompson says most producers average around $150 a head over stockyard prices, an average HCW of $1.28 per pound.
For some producers, distance to The Chop Shop is a drawback. In King's case, it is 123 miles one-way. To reduce that, he shares transport expenses with other producers whenever it is possible.
Thompson acknowledges that producers in Southwest Kentucky can find the trip cost-prohibitive, even at the improved price margins.
"The University of Kentucky's Economic Development Department is working on a transport calculator," she explains. "Long-term, I hope we can get a second facility, but right now, there isn't one with a GFSI certification."
From the producer's standpoint, the important statistics are that 230 head from 28 producers have sold through the program so far.
The demand appears to be there for statewide growth. By late summer, 85 Kroger stores in central Kentucky and southern Indiana were carrying the product. More than 100,000 pounds have been sold.
"It started out a little slow, but today it is great," Kroger meat merchandiser Greg Osborn says. "The word has gotten out about how good a product it is."
CONDITION AND GENETICS KEYS TO STRONG WEIGHTS:
Producers are paid for hot carcass weights (HCW) on cows in Kentucky's Beef Solutions program. This is the hot or unchilled weight of the carcass after slaughter, and the removal of the head, hide, intestinal tract and internal organs.
Clemson University animal scientist Susan Duckett says it's important for producers to know there are ways to maximize the HCW number.
First, consider forage quality. Simply put, the better the forage, the better the weight gain and overall body condition will be.
"Condition is a big part of it," agrees Becky Thompson, director of Kentucky Beef Network. "We tell our producers to shoot for a minimum dressing percentage of 50%. Less than a 50%, and they won't be pleased."
Along with affecting body condition, Duckett adds poorer quality forages will tend to stay in the gut longer. Gut fill negatively affects dressing percent.
"We recommend taking them off pasture the night before they are going to be harvested to help reduce the volume in the rumen," she says.
Secondly, consider the role genetics will play in this last phase. The animal scientist explains, "There are differences between breeds, and higher levels of muscling and fat relate to a higher dressing percent."
Cows in the Kentucky program are overachievers in terms of dressing percent. Thompson says they were told to expect dressing percents in the low 50% range, but most are exceeding that, upping their value.
Harrodsburg producer Cary King says the dressing percent on the four purebred Angus cows he marketed through the program was 57%.
Dan Miller, Beef Solutions procurement director, says commercial cattle producers in Kentucky are at an advantage thanks to herd genetics.
"They have the bloodlines capable of producing a quality carcass. You can add value to a carcass by feeding it, but at the end of the day, you can't feed it past its genetic potential."
Miller and Thompson credit those improved genetics, in part, to tobacco settlement money that's been coming into the state since 2000. It is funneled back to producers through the County Agricultural Investment Program (CAIP). Through CAIP, producers get cost-share funds for investing in genetics, facilities and conservation practices.
Thompson says thanks to that, "producers learned how to produce a good-quality terminal steer. Those same genetics are helping them with their cows."
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