We are evaluating the business prospects of raising and marketing beef for the kosher market. Our interest is stimulated by the price kosher beef commands. Kosher beef cuts in the retail market run $5 to $10/lb. higher than non-kosher beef. These prices are matched only by the market for organic beef. We priced organic beef at Whole Foods market in Union Square in New York City with the same price differential.
We see, therefore, a structured market for premium beef--
- USDA Prime (a USDA regulated label; conventional beef mostly for restaurant trade; antibiotics and hormones can be used in raising the beef, but they must be out of the steer's system before market)--2% of the market;
- USDA Choice and Select (USDA regulated labels; conventional beef for supermarkets);
- Natural beef (USDA regulated label, forbids artificial flavors or preservatives and requires minimal processing; companies must explain what "natural" means on the label; it is increasingly being used to refer to grass grazed beef raised without hormones and antibiotics, but not necessarily on organic fields or supplemented by organic feed);
- Certified organic beef (USDA regulated label, not necessarily grass grazed, but given organic feed and no hormones or antibiotics);
- Kosher beef (not necessarily natural or organic).
I have seen the market for natural, organic, and kosher beef referred to as "value added beef." We can see here that the value-added beef market has to be a very small percentage of the total beef market in the US. USDA premium is only 2% of the total market. Elsewhere, I have seen the organic market defined as 2% also. We are probably, therefore, looking at a total value-added beef market of less than 10% of the total beef market (at least this "guesstimate" gives us a number to disprove).
Other farmers and producers have obviously seen the same price differentials; yet most have not moved to organic beef raising. Why? I haven't found any studies that provide the answer to this question, but several considerations suggest themselves.
The premium beef market, as a mass commodity market, is price sensitive.
Most consumers do not see the health benefits of paying higher prices for natural and organic beef, when all beef is USDA regulated and inspected. They simply don't believe conventional beef is harmful to them.
Beef raising is a low-margin business.
Organic feeds are 50% to 100% more expensive than regular feeds. Farm producers are reluctant to shift to higher production costs in a weak market. The market for beef declined with the Mad Cow scare and diet fads that targeted red meat. People concerned about their health would not eat any beef, rather than selecting one kind of beef over another.
Where does this price vulnerability and cost disincentive leave kosher beef? Kosher beef refers to the slaughter method. Kosher regulations also prohibit consumption of some parts of the animal. Natural and/or organic production methods are not required for the kosher label.
Some observers have suggested that upper-end consumers are attracted to the kosher label, out of a notion that the beef would be of a better quality. Fewer than 1/3d of kosher food consumers are Jewish. Jewish consumers of kosher products purchase 40% of their annual kosher consumption for Passover celebrations.
The kosher market is well defined, but small. It has two major components--domestic and export. The domestic kosher market (2001) is about 10 million Americans who look for a kosher mark on the food label. They purchase about $7 billion worth of all kosher foods (about 75,000 defined kosher food products, including beef).
The largest export market is to Israel. France is the largest European market for American kosher exports. As Israel becomes more prosperous, it is importing more beef. Beef raising for export to Israel exists in the US and Brazil. The extensive Israeli regulations regarding imported kosher beef (all imported beef to Israel must be kosher) are an obstacle. In 2001, Israel consumed about 100,000 metric tons of red meat. The US export contribution to this total was less than 5,000 MT. Export trade publications estimate that export expansion might raise that amount to 15,000 MT by 2006 (I can't find more recent data).
Besides the small size of the Kosher beef market, the domination of the beef market by a few producers and distributors, and kosher licensing organizations inhibit entry by startup beef producers.
What about kosher slaughter?
The main issue is strict application of kosher slaughter methods so as to meet humane standards. Kosher regulations forbid stunning the animal before slaughter (because the animal would be bruised or damaged and consumption of damaged or diseased animals is prohibited). Kosher slaughter involves quickly cutting in the throat the two main arteries to the animals head, then allowing the animal to bleed to death. Temple Grandin's studies have established that, when done correctly and expertly, kosher slaughter methods are humane.The animal does not feel the cut; its brain reaction is no more than its reaction to a fly landing on its ear. Cattle lose consciousness within a minute or two, then they collapse; after that, they hoisted and bled out. After death, they are quickly butchered.
The problem with kosher slaughter methods is that they are difficult to execute consistently. The investigation of Agriprocessors, Inc., the Hasidic plant in Iowa in 2004 by Jewish newspapers, PETA, and the USDA revealed occasional inhumane slaughter, despite the best of intentions. The rate of slaughter is much less than with stunning methods. Efforts to speed up kosher slaughter lead to inhumane results, which everybody condemns. Cutting the throat is a highly trained job. It is difficult to execute correctly when done repetitively, because the shochet wearies. As a result, kosher slaughter methods add another cost premium to the expenses of raising and marketing kosher beef.
To execute kosher slaughter methods humanely consistently, special slaughter lines must be built. The lines must isolate the cattle, at the killing shed, from each other, hold the animal's body and head at a specific angle for the cutting of the arteries, and support the animals immediately after the cut. The necessity for special equipment adds another layer of cost to producing kosher beef.
An indication of skilled labor costs is provided by Israel regulations for US kosher slaughter houses of beef intended for export to Israel. For a slaughter house processing 200 steers a day, regulations require 5 teams of slaughters and examiners. (Regulations prohibit processing over 500 steers a day.) The salaries of these teams would surely cost hundreds of thousands of dollars a year.
We know of no kosher beef slaughter house in Greenbrier County or nearby; consequently, we need to investigate building one from ground up. Costs of slaughter houses are difficult to estimate.
The only estimate I located on the Internet is of a non-kosher slaughter house is from a New Hampshire study of that state's livestock infrastructure. It cites an estimate made in 1993 for a 5,000 square foot slaughter house, complete with refrigeration for the butchered animals, of about $400,000 (not including land acquisition and dirt preparation work). These costs would be higher today, of course. A year after opening, the plant had processed 1,500 beef, 1250 hogs, 1000 sheet, and 250 other animals, or about 14 animals a day (assuming a 5 day work week). Another slaughter house (10,000sq. ft.) discussed in the study employed 5 persons. We assume then that, exclusive of the shochet and examiner, the 5000 square foot slaughter house might employ 3-5 persons. The West Virginia average wage is about $8.50/hour. For three slaughter house employees, the annual labor cost would be about $53,000 (plus benefits).
Looking at the Israel Rabbinate regulations for kosher slaughter, 5 shochet/examiner teams for 200 steers a day, I assume that a slaughter house processing fewer than 50 animals a day would require only one team. The labor costs of the shochet and examiner are not known.
Given the small size of the market, a small slaughter house would probably be adequate to meet demand. In the end it all depends upon the price of kosher beef at the retail store.
(I would appreciate any suggestions and corrections, and wisdom, from any readers in the beef industry. If your suggestions would contribute to this article, please use comments. Otherwise, of course, I appreciate email.)