A monthly view of the North American beef industry with Steve Kay, publisher of Cattle Buyers Weekly, Petaluma, California.

THE US beef industry has spent the past several years promoting the use of ‘new technologies’ to increase productivity and help producers make more money.

Producing more pounds per head makes economic sense, especially as the US cattle herd continues to shrink below 90 million head. It also helps industry claims that it is getting more ‘sustainable’, with fewer cattle producing more beef.

One technology whose use is now widespread are feed additives, commonly known as beta-agonists, which add more pounds of lean meat to carcasses.

US pork producers started using a ractopamine-based additive called Paylean and cattle feeders eventually followed suit with Optaflexx (ractopamine-based) and Zilmax (zilpaterol-based).

Cattle feeders in recent years agonized over their use but began to use them after deciding they couldn’t afford not to. They deemed they would be at a competitive disadvantage to other cattle feeders if they didn’t use them.

Between 60pc and 80pc of all the cattle on feed in the US now receive either Zilmax or Optaflexx, but recent ractopamine-based bans on US beef and other questions have caused many in the industry to question this high usage.

The European Union, Russia, China and Taiwan are among the countries that will only accept beef or pork certified as free from ractopamine (a term that in effect refers to all beta-agonists).

The US Meat Export Federation says that these bans cost the US US$97 million in lost beef exports the first four months of this year and US$58 million in lost pork exports.

Other questions being asked focus on beta-agonists’ possible effect on beef quality in terms of quality grade and tenderness; their effect on animals’ welfare and overall care; what beef consumers might think about their use and how widely the industry should explain their use.

The last point is especially complicated. People who regard themselves as higher-volume beef consumers have told researchers they don’t want to know more about feed additives. But light beef users say they want to know everything about how beef is produced.

Then there’s last year’s media furore over leanly finely textured beef (LFTB) that forced a large US company to close three of its four manufacturing plants. The prospect of a distorted, sensationalised media story about the use of beta-agonists in beef production might seem unlikely. But some in the industry say it remains a ticking time-bomb.

Impact on cattle pricing and marketing

Some of this has been written-up in recent months in the trade and general media. What is much less publicised is what I regard as the biggest downside to the beef industry’s use of beta-agonists.

Their use has significantly altered the pricing and marketing of grain-fed cattle in a way the industry could not have imagined ten years ago.

The use of beta-agonists demands a narrow marketing window if cattle feeders are to get the full monetary benefits from their use. This narrow window has meant much less flexibility in marketing cattle.

For example, there is a three-day withholding period applied in the US after cattle receive their last dose of Zilmax. Then cattle feeders have only 10 to 12 days to get those cattle dead to maximise Zilmax’s value.

Cattle feeders therefore have turned to more marketing agreements with packers to guarantee shackle space (kill slots, in Australian parlance) each week.

This means more cattle than ever are priced on formulas. Some are based on the national cash market, some on the area market and some on plant averages.

The result is that the fewest grain-fed cattle in history are now sold on the negotiated cash market. Yet it still remains the basis for most formula pricing.

Latest USDA data indicates that only one of the five major cattle feeding areas in the US in 2012 sold the majority of its cattle on the cash market.

Iowa-southern Minnesota sold 56.2pc of all its cattle this way, according to packer transaction data. Packers tell me cattle feeders in this region, which includes Illinois, don’t use beta-agonists, hence the large cash trade.

In contrast, they are widely-used on the Southern Plains (Texas, Oklahoma, New Mexico) and in Colorado. So the cash trade there has declined to 10-12pc. The cash trade in Kansas was about 28pc in 2012. Even in Nebraska, once a bastion of the cash trade, the percentage declined to 39pc in 2012 from 60pc in 2009.

There’s another overlooked market aspect to the use of beta-agonists. Once cattle feeders started using them more extensively, analysts say feedlots bid away the monetary benefits of beta-agonists into the price of feeder cattle.

It is no surprise that many cattle feeders are now privately saying they wish beta-agonists would just go away. Every packer I speak to feels the same way.

All this should be food for thought as the Australian industry faces the possibility of beta-agonists being registered for use sometime in the next year.

Australian beef has a market access advantage over US beef due to beta-agonists. I doubt it wants to compromise that or its ‘clean, green’ image. The other issue is that once people start using a certain technology, it’s extraordinarily difficult to stop.

US cattle feeders are learning that lesson right now.

• See Beef Central’s special report published yesterday on the prospect of beta agonist adoption in Australia, click here to view.