A historic alteration, reshuffling or evolution is settling upon the cattle market. I have dubbed the metamorphosis as a sea change. One writer described the reworking of the cattle market as an “alternative meat arms race.”
Regardless of the wording used to describe what is rapidly unfolding in the cattle market, there is no doubt that history is being made that will likely shake the cattle market and ranchers to their very core.
Simply put, several plant-based protein companies have recently announced plans to start selling “ground beef “in grocery stores. The “ground beef” they are selling is not from cattle, but from plants that are grown.
The poster child for fake beef is a firm called Beyond Meat. Here is their mission statement taken from their website: “At Beyond Meat, we believe there is a better way to feed the planet.
“Our mission is to create The Future of Protein — delicious plant-based burgers, sausage, crumbles and more made directly from simple plant-based ingredients.
“By shifting from animal, to plant-based meat, we are creating one savory solution that solves four growing issues attributed to livestock production: human health, climate change, constraints on natural resources and animal welfare.”
To grasp fully how the marketplace, Wall Street, investors and traders are viewing this plant-based alternative to beef burgers, consider the following.
On May 2, Beyond Meat had its initial public stock offering at $25 a share. On that same day, August live cattle futures traded a bit over $111.
On June 18, the stock of Beyond Meat rose a bit over $200 a share, but has since slipped back to about $170. At $200 a share, Beyond Meat stock had gained about 700% from the initial offering.
August live cattle, on the other hand, fell to a low of $102 this week. And my work suggests loudly that August cattle should, could or may fall under $100 before long.
The marketplace certainly believes that plant-based meat has an enormous potential to make money. But there are other equally important factors at work, as well.
From an opinion piece in the New York Times by Timothy Egan with a headline that reads “Fake Meat Will Save Us,” Egan puts forth an argument for fake meat by stating at one point the following: “At a moment when animal-based agriculture is near the top of planet-killing culprits, ditching meat for substitutes, faux or otherwise, is the most effective thing an individual can do to fight climate change, according to a study in the journal Science.”
Before shrugging off fake meat as nothing more than a fad, consider the following famous last words of some experts in the electronic and computer industry from years gone by:
- “I think there is a world market for maybe five computers,” Thomas Watson, president of IBM, 1943.
- “Television won’t be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a plywood box every night,” Daryll Zanuck, executive at 20th Century Fox, 1946.
- “There is no reason anyone would want a computer in their home,” Ken Olsen, founder of Digital Equipment Corporation, 1977.
- “Apple is already dead,” Nathan Myhrvold, former Microsoft CTO, 1997.
There is now a long list of firms entering the plant-based, fake beef, chicken and pork business. Based on history, competition for market share will only intensify with the bottom line being lower costs. That is how it works in a free marketplace.
Computers, televisions and a wide range of other products have declined in price because of competition. The same will take place with plant-based meat and fake hamburgers.
Imagine, driving up to a hamburger joint with a menu offering a beef-based burger for $8, or a plant-based burger for $4. In your rearview mirror you notice younger folks eager to fight climate change to save the planet ready to place an order. I would bet heavily and so is Wall Street that the $4 burger will outsell the $8 burger.
A fundamental principle of economics is “price moves the product.” There also is no doubt that as more and more firms enter the “alternative meat arms race,” plant-based meat will get cheaper and cheaper, making it more and more difficult for beef to be competitive.
The same can be said about pork and chicken. In fact, fake chicken meat is now far outselling fake beef hamburgers.
A sea change is at hand for the cattle market and ranchers. And the only positive I can offer at this point is the sea change will not begin to be felt until 2020 and beyond.
At least, I don’t think so.