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Pink slime bankruptcy: After the backlash, what's next for beef?

Pink slime bankruptcy: A major beef processor has declared bankruptcy, citing the backlash against 'pink slime.' The economic fallout from pink slime is just beginning. 

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A ground beef display is seen at a Fresh and Easy market in the Van Nuys section of Los Angeles March 28, 2012. The public outcry over lean textured beef, popularly known as "pink slime" has the beef industry reeling.

Phil McCarten/Reuters

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Whatever your feelings about "lean, finely textured beef" – or “pink slime,” as it’s become known – you probably won’t be eating the stuff much longer in your ground beef. The contorversy has claimed its first corporate victim – AFA foods, a grounnd beef processor based in King of Prussia, Penn. is seeking bankruptcy protection, citing the media coverage of pink slime as the cause.

“Ongoing media attention has called into question the wholesomeness” of the meat, and has “dramatically reduced the demand for all ground beef products,” AFA interim Chief Executive Officer Ron Allen stated in court papers.

What does the pink slime bankruptcy mean for the consumer? Well, your burgers may cost a little more. And your hot dogs might cost a little less, if pink slime moves, as expected, to other processed meats.

In the past few weeks, the public backlash against the product has been swift and unrelenting. Grocery stores pulled lean ground beef containing pink slime from their shelves; school districts ripped beef products from their cafeteria food lines en masse, and three of the four factories that make the beef substance have been shuttered temporarily. Congress has even gotten involved, with several members calling on the US Department of Agriculture to ban of pink slime in school lunches.  

“We’ve been moving quickly, but this issue caught us by surprise,” says Janet Riley, a spokesperson for the American Meat Institute, based in Alexandria, Va. “I’ve been here 21 years, and this one was pretty amazing. We feel like the technology is so valuable that we are going to fight for it, but I don’t know what the outcome will be."

That technology involved is a mechanical separation of fat from trimmings with a centrifuge. In order to prevent bacterial contamination of such cuts, the beef is treated with food-grade ammonia during the process – a tactic that has also come under fire from critics.

“It enhances the safety of the product,” Ms. Riley insists. "If you cook product thoroughly, you destroy bacteria. But they aren’t always cooked thoroughly. [The process of] grinding beef distributes naturally occurring bacteria throughout. Ammonia destroys that bacteria. It’s a way to add an extra margin of safety.”

In a show of support for the embattled product, the governors of Iowa, Kansas, and Texas on Thursday toured a Nebraska plant where the product is made and issued a statement saying it is safe.

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But detractors argue that any food product that requires ammonia treatment to be safe to eat is unacceptable, even if it is safe. In addition to the visceral gross-out factor of the “pink slime” process – not to mention the accompanying photos – such opinions may have doomed the product. So in the absence of lean beef trimmings, what’s next in the world of ground beef?

Higher prices, most likely. “The loss of this product will have an impact. It will influence the industry, but it’s hard yet to tell the scope,” says Chris Calkins, a professor of animal science at the University of Nebraska in Lincoln. “Initially, the availability of raw materials for lean ground beef will go down, and that part of the beef carcass will have less value. It disrupts the chain of supply and demand.”

That means for the consumer, the price tag of lean ground beef will go up, at first. A spokesman for the National Meat Institute forecast that school districts looking to buy beef without pink slime will have to spend roughly 16 percent more.

Whether beef prices stay high depends on the industry’s ability to adjust, Dr. Calkins says. “If the price goes higher, then [customers] are going to have to be willing and or able to pay for it, or they will trade down for a product that isn’t super lean.”

Exacerbating the price issue is the fact that beef prices are going up anyway. Because of drought conditions in states where beef cattle are raised, resulting in a lower supply of grain and corn to make feed, the number of cattle is low – as low as it’s been since the 1950s, according to Calkins.

“The challenge is that we are going to need 1.5 million more cattle to replace the meat that we would use for this process, at a time when we’re already seeing higher prices because of drought and feed,” Riley adds.

Calkins thinks that the loss of a domestic meat supply will increase US imports of beef, something that the country already relies on heavily. “There is strong consumer demand for lean ground beef so you have to find a different source of very lean meat for grinding. That means an increase in imports. We bring more cheap beef in than we supply, and export high quality steaks and cuts, because there’s a global demand. Lean beef – we bring it in for a less costly source of raw material.”

But what happens to the pink slime? “The products that used to go into lean finely textured beef, those products can go into manufactured items: in hot dogs, frankfurters, etc,” Calkins says “ I don’t think it will get thrown away, but it will oversupply that part of the channel.”

That could mean lower prices on those products, if briefly. “It will take a while for the industry to sort that out,” he adds.

It’s early yet,  but there’s little evidence so far that consumer demand for lean ground beef has been affected by the controversy. “I think everybody’s looking for that, but I haven’t seen anything that suggests it,” Calkins says. “We have the highest quality safest product in the world, so it's no surprise that ourcustomers like it and continue to eat it.”

“It’s not like everyone’s eating hamburgers every day anyway,” he adds.

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