Big-box beef

Walmart, the largest food retailer in the U.S., officially entered the beef business in January when it opened a case-ready beef plant in Georgia after establishing its own Angus supply chain.

Creating an end-to-end beef supply chain is the latest step Walmart has taken in its vertical integration strategy for food and toward its stated goal of improving the quality of its food offering, according to a new report from the Knowledge Exchange division of CoBank, a cooperative bank serving agri­businesses across rural America such as MFA Incorporated.

If Walmart’s new beef plant and Angus supply chain succeed, it could lead the retail giant to take another step toward the producer in the form of harvesting fed cattle or through a joint venture with a current packer.

The new plant will cut and prepare steaks and roasts produced by Walmart’s Angus beef supply chain for 500 stores in Florida, Georgia, and Alabama. Walmart will need to convince customers that the attributes of its beef, which is hormone-free, traceable and potentially of higher grade, make it worth buying at a premium price.

“While Walmart’s new beef strategy could make waves for the industry in the future, in its current state we don’t see it shifting the price and leverage dynamics of U.S. beef production,” said Will Sawyer, animal protein economist with CoBank. “By our calculations, this new supply chain will account for less than 5% of Walmart’s U.S. beef busi­ness and less than 0.5% of U.S. beef production.”

Sawyer said U.S. cattle producers, feeders and packers will not likely suffer any significant near-term changes from Walmart’s beef strategy, which the report described as “more of a test” that could lead to much bigger and more significant investments in the future.

Watch a video synopsis and read the report, “Walmart’s New Beef Plant is More Sizzle than Steak, For Now,” at cobank.com.