The strength of demand for any commodity can be difficult to measure, and beef is no exception. Although it is tough to analyze the combination of the amount of beef consumers are purchasing and the price they are willing to pay for it, measuring demand is vital to understanding why markets have performed as they have and what direction they are most likely to take moving forward.
One tool available to measure beef demand strength is provided by Glynn Tonsor at Kansas State University. His indices for both choice beef and all-fresh beef at retail report that domestic demand slightly strengthened in 2019, at least for the first 11 months for which data is available.
This continues what has been a general uptrend since the setback of the 2008 economic recession, although there have been some hiccups along the way.
In addition to being the third consecutive year of stronger domestic beef demand, 2019 also marked the largest increase in four years for the choice beef retail price. While last year’s retail price remained 25 cents per pound below the 2015 record high, it was the second-highest annual average ever recorded.
So what are the expectations for beef demand in 2020?
Weak on domestic side
Although there is optimism to be had on the trade side, 8 or 9 pounds of beef are consumed in domestic channels for every pound of beef that is exported. This places a lot of importance on whether U.S. consumers will continue to increase their demand for beef, even if export quantities do increase this year.
While most signals for the U.S. economy remain positive for 2020, there is a growing uneasiness that the best years of growth may be behind us.
Various projections for U.S. GDP growth in 2020 tend to center around the 2% mark. While this is nothing to sneeze at, if realized, it would be only the third time since 2011 that growth was slower than 2.25%.
Another factor that could point to a weakening of domestic beef demand this year is the growing availability of relatively cheap pork and poultry. The sum of pork, chicken and turkey available for domestic consumers is projected to grow by nearly 2 pounds per person this year, rising to a level nearly 20 pounds higher than that in 2014.
Quality still sells
There still is upward momentum in the demand for higher-quality beef. This has been the fastest-growing component of overall beef demand in recent years, and minimal slowing of economic growth is unlikely to reverse the trend.
Unemployment rates and gasoline prices also are projected to remain favorable for beef demand in general, and higher-quality beef demand in particular.
With arguments to be made on both sides of the domestic beef demand outlook for 2020, there is little cause for alarm regarding a significant slowdown, unless the economy struggles much more than currently projected.
Combining steady domestic beef demand with a projection of less beef available to domestic consumers because of modest production growth and stronger expected exports leaves room for some expected improvement in cattle prices this year.
Brown is a livestock economist with the University of Missouri. He grew up on a diversified farm in northwest Missouri.