Better Beef Through Biotech

Safeway forms partnerships to develop genetic tests to breed cattle with higher-quality, tastier meat

Tom Abate / SF Chronicle 11feb01

Safeway has roped genetics into the quest for the perfect steak.

The Pleasanton grocery giant is quietly lining up alliances with a beef grower and a biotech firm to use genetic tests to guide the breeding of tastier, more healthful beef to sell to its shoppers, The Chronicle has learned.

Although other meat producers and biotech firms are racing to develop similar breeding programs, the Safeway alliance seems poised to be the first to use genetics to shake up traditional cattle ranching practices.

"As far as I'm aware, none of this technology is being used in commercial breeding yet," said Mohammad Koohmaraie, a scientist at the U.S. Department of Agriculture's Meat Animal Research Center in Clay Center, Neb., which has discovered genes that could be used in Safeway's program.

Safeway has tried for months to keep its cattle deal under wraps, in part to avoid tipping off competitors. The company also fears that its genetic test program could be confused with the more controversial genetic engineering. But in response to questions from The Chronicle, Safeway spokeswoman Debra Lambert reluctantly confirmed that the grocery giant has "an early-stage relationship" with Future Beef, a Denver cattle raising and slaughtering firm.

Future Beef Vice President Darrell Wilkes declined to discuss his dealings with Safeway, but stressed that Future Beef will not be doing the sort of genetic engineering that would alter cattle.

"We're not talking about transgenics or genetic modifications," he said. Wilkes confirmed that Future Beef has negotiated with AniGenics Inc. of Concord, Mass., to develop screening tests, akin to DNA fingerprints.

These tests would identify bulls and cows with desired traits, such as fast weight gain, disease resistance and tenderness. With this information, cattle ranchers could be steered to breed only the best animals, which would raise the quality of beef over time.

"We won't touch these animals' genes. We're just cataloging their genetic profiles," said AniGenics Chief Executive Officer Steve Niemi. "Their sex will happen the way it has for millennia."

Future Beef and AniGenics are still wrangling over the details of their proposed collaboration.

Evidence of Safeway's role as the patron of this cattle-breeding program surfaced after two financial newsletters reported that the grocery chain helped Future Beef win a $160 million loan last year to build a new meat- packing plant. One newsletter also reported that as part of the deal, Safeway made a 10-year purchase contract with Future Beef.

Andy Wolf, a financial analyst who follows Safeway for BB&T Capital Markets of Richmond, Va., was unaware of the deal with Future Beef, but said it would be a logical move. As one of the nation's largest grocers, with 1,680 stores across the United States and Canada, Safeway has already put its Safeway Select label on roughly 30 percent of the products it sells, everything from bread to corn to cola.

"Beef is about 10 percent of a store's dollar volume," making it a tempting target for a private label, Wolf said.

Moreover, industry observers say beef is a product that demands improvement.

"The consumer wants three things -- quality, consistency and convenience -- and for a long time the beef industry wasn't delivering on any of them," said Wayne Purcell, director of the Research Institute on Livestock Pricing at Virginia Tech in Blacksburg, Va.

For instance, 1 out of 5 times, Purcell said, the consumer who paid extra for a choice cut got beef too tough to chew. Consumers had no reliable way to distinguish quality beef, and the market had no way to reward ranchers who raised better cattle. Purcell blamed this failure on fragmentation in the beef business.

Cattle raising begins with hundreds of thousands of ranchers, most of whom only own a bull and a couple of dozen cows. The ranchers breed and raise calves that they wean and sell to yearling operators.

The yearling operators graze cattle in fields before selling their herds to feedlot operators. Feedlots pen the beasts and fatten them on grain before selling them to packing plants. The packing plants render the carcasses and ship them to the butchers and grocers who trim the meat to fit our plates.

COMPETITIVE SYSTEM

Margins are thin at each step. "We're talking about 1 or 2 percent in a good year," said Brad Caudill, spokesman for Fresno County's Harris Ranch Beef Co.

Faced with thin margins, the multilayered market tended toward cutthroat tactics, with each producer trying to increase profits at the expense of its predecessor.

Purcell said this market system robbed ranchers of any incentive to set up breeding programs to improve their herds. Why bother, when any extra profit for quality would be swallowed by the packing plant or the grocer?

While beef ranchers bickered, Purcell said, pork and chicken producers were improving the quality and consistency of their meats using selective breeding programs driven by artificial insemination technology.

"Chicken was kicking our pants," said Purcell, who has charted the steep decline in beef consumption, relative to chicken and pork, between 1979 and 1998.

During the past few years, however, beef producers have halted the slide by forming business alliances that give ranchers up and down the line a share of what they hope will be higher profits by producing superior, branded beef.

HARRIS RANCH ALLIANCE

For instance, Harris Ranch has enrolled 75 ranchers, running 40,000 cattle, in a breeding alliance designed to produce branded beef for smaller grocers like Cala Foods, Piedmont Market and Bell Markets.

Harris shares its higher margins with the ranchers who follow its cattle- rearing regime. That system involves tracking physical characteristics to determine which bulls produced the best offspring -- and thus should sire future generations.

Future Beef and AniGenics propose to take this sort of profit-sharing alliance to a more scientific level by using genetic tests to pick the best breeding stock.

Niemi said AniGenics will help Future Beef develop quick, cheap DNA sampling tests that will track 5,000 cattle to start. Ranch hands will tag and track these cattle throughout the two years before they reach the packing plant, recording how long they take to reach certain weight targets, how often they get sick and how much feed they consume.

At the new Future Beef packing plant, which will be finished within months, workers will record the ratio of meat to waste and other characteristics like tenderness.

By the second year of the program, Future Beef will be tracking 45,000 cattle, Niemi said, creating an enormous database of genetic traits cross- referenced with meat production characteristics.

By finding patterns in this data, the partners expect to identify the best bulls -- it's easier to breed through males because they typically service two dozen or more cows -- resulting in meat of a consistently high quality.

"In two years we hope to know some of the (important) genes, and in four years we hope to begin changing the cattle in the production system," Future Beef's Wilkes said.

E-mail Tom Abate at tabate@sfchronicle.com