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The Economics of Pink Slime

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Pink slime, or lean finely textured beef (LFTB) grabbed the spotlight in March after prominent blogger, Bettina Siegel, launched an online petition to get it banned from public school lunches. ABC News did a report shortly thereafter, and the backlash against the product has been quick. BPI, LFTB's primary producer, has temporarily shut down 3 of its 4 plants and AFA Foods has declared bankruptcy. The media has been quick to cover the nutritionists', activists', and industry leaders' point-of-views, but what can the economist add to the conversation?

Monday afternoon, I sat down with economists Dr. Brian Buhr, an expert in livestock markets and Dr. Michael Boland, director of The Food Industry Center to discuss the economic issues around LFTB. The story they told was one of waste and margins. Dr. Boland hypothesized that part of the need for LFTB comes from a USDA grading system that rewards intramuscular fat levels (commonly called marbling) because it improves a flavor profile of fresh beef cuts desired by consumers. A beef carcass with high amounts of marbling requires additional lean trimmings when making leaner ground beef for hamburger patties. Dr. Buhr added, the market hole that LFTB filled was created when case ready boneless meat cuts were packaged at the processing plant rather than at the retail butcher. Consumers wanted boneless meat, but the lean trimmings next to the fat and bone were too difficult to recover by hand. This is when Eldon Roth developed a way to spin the fat away from the meat and quick-freeze the remaining meat, creating LFTB. Additionally, Buhr and Boland noted the U.S. meat industry must compete with leaner foreign imports and that LFTB contributed to gains in meat yields because it reduced waste. Russell Cross, an animal science researcher at Texas A&M, estimates that 13 pounds of beef per animal is lean trimmings. He also estimated we'd need to raise at least 1.5 million more cattle every year to make up the loss if lean trimmings were discarded. In a time where 27% of food in America gets thrown out, Buhr pointed out the ethical ramifications of increasing already high food waste.

As economists, their analyses quickly steered towards pricing. When asked what the backlash would do to the market, Buhr pointed out the alternatives are more expensive. With a short supply of cattle and record high meat prices already, cutting out the use of lean trimmings will result in even higher prices. He added that an important element missing in the conversation is the regressive nature of increasing prices; making a lean complete protein harder to access for the poor than the rich. When asked if the effects on the meat market would be lasting, both economists were hesitant to answer. Boland noted how BPI and other producers are hoping that labeling retail products 'made with lean trimmings' will improves sales and calm consumer fears. He predicted that with meat demand as high as it is, the industry will find a new way to utilize lean trimmings because they can't afford not to. They both agreed the long-term backlash depends on what consumers are upset about. Are consumers upset about the ammonium hydroxide or the trimmings? Buhr commented that the use of ammonium hydroxide in food is regarded safe by the FDA. Both added they were surprised how quickly the backlash initiated a downhill slide for these companies, especially considering it did not stem from a food safety issue. Buhr closed by saying the issue illustrates the meat industry's need for better communication with its consumers and a proactive approach to thinking about what the next 'pink slime' is to get ahead of the conversation.

Join us on Thursday as we continue the discussion of livestock markets and the economics of using antibiotics as growth promoters in livestock feed.

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This page contains a single entry by Sadie Dietrich published on April 18, 2012 2:52 PM.

It's a food shelf. It's a grocery store. Can it be both? - was the previous entry in this blog.

Jump in food need has Minnesota schools looking for ways to help | Minnesota Public Radio News is the next entry in this blog.

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