One reason consumer beef demand may be staying stronger than some expected amid record retail beef prices is the simple fact that consumers expect the price to be higher.
“If consumers believed high beef prices were a short-term impact, they would very likely avoid the high prices and substitute away from beef,” explains Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in his weekly market comments.
For a good while, though, the media has told consumers to expect higher beef prices for an extended period of time because of the multi-year drought and dwindling cattle numbers.
“The prospects for high prices for an extended period of time may be causing consumers to have more of a, ‘get it before the price goes even higher’ attitude,” Peel explains. “Consumer preferences do not change easily or quickly. Consumers resigned to higher beef prices will make some adjustments but will continue to purchase beef.”
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Peel also reminds that higher-than-expected pork prices are applying less pressure to beef prices than anticipated.
“Pork supplies are dropping now as a result of the PED virus and higher pork prices ahead will help support higher beef prices,” Peel says. “However, abundant broiler supplies and relatively cheap poultry prices have, somewhat surprisingly, led to little substitution of chicken for beef so far. Consumers may be reacting differently to higher beef prices, in part, because of the expectations they have for the future.”
Retail beef prices reached a new record high in February of $5.28/lb. for all-fresh beef, according to the monthly Meat Price Spreads from the USDA Economic Research Service this week. The average retail price for Choice beef in February was $5.58.
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