By David Bowser

HOUSTON — There are three ways to lose money — slow horses, fast women and raising beef cattle, according to H. Christian Oberst, past president of the International Meat Secretariat.

"Raising beef cattle is probably the most boring of the three," quipps the British native.

In the 44 years he has spent in the meat industry, he has worked at every level in the production and marketing of beef.

"It is a mystery why we stay in the industry as long as we do," he says. "We all start out in the expectation of making a living, if not a fortune, in the simple task of feeding the world's growing population, happy in the thought that in good times and bad, people must eat, and that the meat industry, if unspectacular, must at least be safe."

It is a complex industry with cyclical commodity markets, he says, but it is influenced by more than economics.

"It is affected by politics at every stage," Oberst continues. "I doubt whether today there is any country in the world in which the food supply and agricultural production are not affected by national political considerations. The notorious Common Agricultural Policies of the European Union transfer every year billions of taxpayers' dollars to the pockets of Europe's quite small rural population."

Those in agriculture account for only two percent of the European working population, yet the CAP represents more than 50 percent of the budget of the Brussels commissioners.

The European CAP is only an extreme example of what happens around the world, he says. In Japan, agricultural producers enjoy protection against competition for reasons that have absolutely nothing to do with economics and everything to do with national strategic and social policies.

"Sometimes we face simple protectionism, but not always," he notes. "Sometimes, policies ostensibly designed for consumer protection actually have the opposite effect. They restrict choice, raise prices and sometimes they simply add to consumer fears about food quality.

The decision of the European Council of Agriculture Ministers in 1988 to ban the use of hormone growth-promoters in animal production is a good example. When it became apparent that a committee composed of eminent scientists with all the right credentials would recommend a restraint on some but by no means all growth-promoters then in common use, the politicians disbanded the committee and refused to wait for its report.

"'Don't confuse us with the facts,' they said in effect. 'We have made up our minds!'"

But none of this is new, Oberst says. Politics has always played a part, and as trade becomes increasingly global, so do the politics, even if 90 percent of meat produced in the world is eaten in the country of origin, and only 10 percent is traded internationally.

"But that 10 percent has a profound effect on the economy of the industry in each of the producing countries," he says. "We do live in a global village, and a shock in one part of the world has knock-on effects everywhere else."

What happens in one market affects all markets in a global economy.

"Globalization of trade is one of the challenges we face," he cautions. "There are fewer and fewer barriers to hide behind. We have to meet the competition head-on. Even Europe, I hope, will not be spared in the next round of WTO negotiations, starting this year, and the EU will be forced to admit imports from more efficient producers around the world.

"Already, some beef from Argentina invades the U.S. market — at present under quota. You may not like the idea, but you are going to have to live with it."

When Argentina is fully free from Foot-and Mouth Disease, their producers will join the Uruguayans in competing in markets the U.S. has opened up in Korea, Japan and the Far East.

There is also the problem of competition from meats other than beef, and from foods other than meat.

"All societies in the developed world have become steadily more affluent during the past 60 years," Oberst says. "In my country, during my working life I have seen the cost of food for the average family fall from 30 percent of disposable income to less than 10 percent, and I have seen meat fall from 25 percent of food expenditure to barely six percent."

Fresh fruits and vegetables of all kinds are daily transported halfway round the world and delivered fresh. Fish from every ocean can be delivered to the center of every continent every day of the year, and as ocean stocks are depleted, farmed fish keep up the supply and keep down the price to competitive levels.

"Is it any wonder, then, that meat accounts for a smaller share of the housewife's food dollar than ever before, not just in the U.K. and the U.S.A. but in almost every other country in the developed world?" Oberst asks.

Within the range of meats that compete for that fraction of purchasing power, it is beef that has found it hardest to compete on price terms. The industrialization of poultry and hog production and processing has not been possible with cattle.

"Happily, competition isn't all about price," Oberst points out. "It is about the consumer's judgment of value, and that depends crucially on consumer perception of quality, fitness for purpose and eating satisfaction."

Beef producers can no longer assume that a prime steak represents every consumer's choice for a satisfying meal. They must remind consumers that a steak is different from the pre-prepared dish of ethnic food that may or may not contain a portion of ground beef or other meat of doubtful origin, Oberst says.

"That means advertising, and that costs money, but in a competitive world the man who waits silently for his customer to come to him is likely to wait, more and more often, in vain," Oberst says.

But there are a number of problems which may lead to a drop in sales of beef internationally. The BSE problems in Great Britain had repercussions around the world, and there are the financial problems of the Far East and the CIS, the former Soviet Union.

"The market for beef in the CIS has virtually disappeared for lack of purchasing power," Oberst notes.

The landscape has changed, he says.

"Those who operate in the industry today are right to feel that they are grappling with problems for which a lifetime's experience has not equipped them to deal," Oberst says.

But there are opportunities in the world for beef, he believes. Most noticeably, the development of unique selling propositions, or niche marketing.

"Beef, at its simplest, is a commodity, and as such it is prey to all the pressures that all commodities are heir to," Oberst says. "Of course, you may have differentiated your product, or the service that you provide, so far from the common herd that you will deserve a premium on any market and can survive a downturn through the loyalty of your customers who cannot match your product elsewhere at a cheaper price."

Growth may not be the answer, he warns.

"Bigger is only better if unit price is maintained," Oberst insists. "It is not better if it contributes to an over-supplied market and to a lower market price."

More and more U.S. beef will be marketed overseas. The markets in the Pacific Rim have been well researched. The U.S. Meat Export Federation has put in prodigious efforts there over the years to build a franchise for U.S. beef, but so have the Australians and New Zealanders.

"Though temporarily in recession, these markets will come again, and grow steadily," Oberst says. "Nothing is likely to change the fact that the Japanese are beginning to equate beef with an up-market lifestyle. While throughout the Western world, diversity in the diet tends to mean eating less beef, the situation in developing countries is quite different — there, as in Japan, eating beef is something to aspire to.

"The economists tell us that correlation between beef-eating and affluence is most apparent where personal disposable income is somewhere in the range between $1000 and $10,000 per year. Happily, there are many people in developing countries whose income lies in that range, and as their income rises, the chances are that their consumption of beef will rise, too."

Incomes will double within 10 years in China, but that may not mean more beef.

"How much will the Chinese spend on beef, and how much must they import to meet the shortfall between demand and domestic supply?" Oberst asks. "Well, from recent observation I should say that the Chinese appetite for some agricultural products will grow enormously — certainly cereals and perhaps pigmeat, but I do not expect beef to be among them. In a predominantly rural country the size of China, cultural changes take a long time to happen, and the preferred meat of the Chinese is pork. China will continue to import some beef to feed the tourists and incoming businessmen, but the tonnage involved will not be enormous."

There will be few sales to India because of religious concerns, but there are no religious hang-ups about beef in Africa.

"Flesh is everywhere a prized commodity, and production is in many areas inhibited by unreliable rainfall," he says. "Sub-Saharan Africa is slowly emerging from its Dark Ages. In many countries, political instability is still effectively a barrier to trade, but in the countries of Southern Africa it is a different story."

Political stability, especially in the Republic of South Africa, will lead to growing prosperity, and the demand for beef will grow.

"Who is going to supply it?" Oberst asks. "Not, if recent history is anything to go by, the United States. Your total shipment of beef cuts to South Africa in 1997, the latest full year for which figures are published, amounted to 304 tons plus a small amount of offals. In the same year New Zealand shipped several thousand tons, and that was an eight-fold increase on the previous year.

"Now, I do not suppose that this will be a very highly-priced market, but it looks very much as though some exporters are finding it worth their while exploring. Every packer and every retail butcher knows that if you can sell your low-priced cuts first, your high-value cuts will be all the more competitive later. So it may not be wise to neglect opportunities in South Africa.

"And what about Indonesia? The Indonesians, long thought of as consumers of pigmeat and poultry, imported several thousand tons of beef last year, even after the economic meltdown. These secondary markets are certainly worth considering."

Oberst concedes the immediate future does not offer a very rosy picture for cattle producers.

"To survive the next few years may well involve some belt-tightening," he says, but he adds, "We have been here before, and I suspect that most of us will still be here when the good times come again."