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1.
Developing the market for U.S. beef in Japan
2.
Products for the Japanese market
3.
Japanese requirement for BSE testing
4.
Thoughts on the future: beef in Asian markets, the U.S.
beef industry
W: I wonder if I might ask you
to speculate a little bit about the future and share
with us your thoughts about, when the BSE issue is resolved,
what you think the future is for U.S. beef in Asian
markets? And do you have some opinions on China and
Korea, as well as Japan?
F: I think there is a huge opportunity,
and it has been growing every year. It’s been
double digit growth, I think, over the last number of
years. I’ve spent a lot of time in Asia. With
Cargill, we built a chicken plant in Thailand. We built
a pork operation in Taiwan. Anyone who has spent any
time over there knows there is a demand for U.S. product
and for meat, whether it is beef or pork or chicken.
What we have to do is just meet the demand, just do
the things that they would like and let price determine
[the market]. There will be a lot of factors. The weakness
or strength of the dollar is going to play a huge role
[as well as] how economical the various cuts are. As
you do anywhere, you have a wide range of income [in
Asia] and, even if the population with upper income
is only one percent, one percent of China or even half
a percent is still a lot of people. The issue is going
to be whether we can continue to produce the quality
efficiently. South America is going to capture some
of [the Asian] market…and Australia...it’s
going to be critical that we are aggressive on beef.
The quality of U.S. beef is different. The more we can
do to get them geared to our product is great. When
we have embargos and trade restrictions like that it
only ends up hurting agriculture in the U.S., but there
is no question that there is a tremendous market over
there.
W: Have you been to Korea? What
do you think of their market?
F: The demands in Korea are a little
different from Japan. For example, bones—they
buy more bones than Japan does. They use them for soup.
I don’t know all the uses. They like variety meats.
They like some rib cuts. [Sometimes] there is a higher
demand in Korea. They take all of the cuts. There also
is a demand for strips, tenderloins.
W: What about China? Do you ship
there?
F: We ship some items to China but
for us, this [amount] has been small.
W: I would also like to hear some
of your thoughts on the future of the beef industry
in general. You have a position in a certain type of
niche market. Do you see more niche markets in the future
of the industry, for example organic beef or grassfed
beef or other types?
F: Yes, over the last ten, fifteen
years, even some of the bigger packers have things like
Certified Angus Beef [trademark]. Excel has the Sterling
Silver [Premium Meats trademark] that you see in stores.
These were developed maybe fifteen years ago with the
idea in mind that there is a demand for a specific product,
but it is very difficult for the bigger packers to fill
some of that demand. That is why certainly all of the
organic beef is being processed by small plants. I don’t
know of any of the big packers that are doing that.
And the All Natural—We have plans that within
three to four months, probably as much as half of our
production will be All Natural. We’ll be able
to trace all cattle back. We’ve put a software
system into this plant to be able to track cattle through
the system and all the way back to the ranch. With the
BSE issue, there was all of a sudden a bigger demand
for All Natural product. People have a misconception
that All Natural has less of a chance for BSE. It’s
the same chance. It’s in the feedyard. It’s
the same as any other animal. The only difference is
that there are no hormones and no antibiotics but neither
of those contribute one way or the other to BSE. But
the perception of the consumer mind is that All Natural
might be safer.
W: All of your beef is finished
as grain fed, you don’t process any grassfed?
F: Yes, we don’t do any grassfed,
but if there were a market for high end Angus cattle
that were grassfed we’d see. If there was a big
enough market for that, it’s very possible. Grassfed
[beef] is a distinctly different flavor. I think that
the demand for all that will increase. Whether it increases
enough…
We are sort of a big little packer. Some of these things
will start with a really little, little packers. And
then if it builds up to where it is of interest to bigger
packers, we are sort of at the second level. That’s
been both the opportunity and the struggle with our
plant. We are not big enough to compete on a cost basis
with the big packers, but we are much bigger than just
a little player so we have a huge overhead structure,
a big plant. You always need to maximize what you put
through any plant. You’re always better to have
a plant that doesn’t have quite enough capacity
and you are pushing it to the limits versus a really
big plant where you are only running about a half or
two thirds of what it could produce. That was one of
the big impacts here when we were cut off from our export
market. We’ve only been running three or four
days a week. That just will not work.
W: I read that you had to lay
off people.
F: Yes, both the layoffs, and we’ve
had to have fewer hours for all the employees that are
here. That impacts upon the whole economy of Kansas,
for the towns of Winfield and Ark City. [Laid off workers]
don’t buy cars. They sell their homes or whatever
they have to do to survive. Most of the people in the
plant work week to week. That is what’s upsetting.
Politicians will not set timelines. The government negotiations
here are taking way too long. This happened on December
23. There should be more of a public outcry.
W: One last question, what do
you think that Kansans need to know about Asia in order
to market our products there?
F: I think more Kansans need to travel
there to understand Asia. What they need to understand
is what great customers they are. The great thing about
Japan, and certainly some people do understand this,
is their integrity. I’ve never known a contract
in Japan that has not been honored. We do a lot of verbal
agreements. I think it all [comes from] their attention
to detail and that’s what ‘s important when
you see them as a customer. They are very detail-oriented
and they know what they want. [U.S.] suppliers should
be a lot more aggressive [in that market]. We’ve
got a lot of items that Japan wants. The people who
have done well with Japan a lot of the time are small
entrepreneurial companies where someone went to Japan
and developed those relationships. That is true anywhere
in Asia.
W: Thank you for talking with
us. We have learned a great deal.
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