“Overall, I would consider beef demand to be stronger than many analysts have expected, but to still have significant room for further enhancement,” says Glynn Tonsor, a Kansas State University agricultural economist.
In fact, contrary to gut instinct this spring, domestic consumer beef demand has actually grown. Compared to 2011, the All Fresh Beef Demand Index (AFBDI) was 5.67% higher in 2012. The Choice Beef Demand Index (CBDI) was 4.05% higher, says Tonsor. He maintains these indices for the industry.
Although the CBDI was 0.14% lower in the first quarter of 2013 compared to the first quarter last year, the AFBDI was 1.57% higher.
This reality can be difficult to comprehend when considering the declining cattle prices since the first of the year, the dearth of boxed-beef trade, and struggles to glimpse profitability in any industry sector. But squaring the truth of stronger demand with such anemic prices requires understanding the difference between demand and quantity demanded.
Tonsor explains beef demand represents a schedule of quantities that consumers would purchase over a range of prices. Quantity demanded, on the other hand, represents the quantity consumers will purchase at a given price — it’s a single point along the demand curve.
Consequently, the quantity demanded can decrease, while the demand curve can remain constant or grow as the recent example of beef demand.
Incidentally, you can find fact sheets and informative videos offering more insight into the subtle complexities of beef demand at www.agmanager.info.
Though current beef demand has proven amazingly resilient, Tonsor says, “One of the current concerns is the relative price of beef as beef-to-substitute meat-price ratios continue to increase.”
Increasing value for any product or service means decreasing the cost relative to the benefit or vice versa.
Beef lost the price race about the time Noah figured out that beef tastes a lot better than whatever chicken happens to be slathered in. As retail prices grow with decreasing supplies, consumers receive less value for their beef purchase unless benefits continue to increase.
Last year’s checkoff-funded, semiannual Consumer Beef Index was atypically stronger in the spring than midsummer.
“Our hypothesis for this decline is that when consumers pay a lot for beef, frugality becomes a watchword,” says John Lundeen, senior executive director of market research at the National Cattlemen’s Beef Association, a contractor to the beef checkoff. In the fall 2012 Beef Issues Quarterly, Lundeen explains: “But beyond that, expectations become heightened — since the consumer has paid more, they want taste to be awesome, quality to be high, safety to be iron-clad, and the family to walk away from the table satisfied.”
In last summer’s survey, Lundeen says the percentage of consumers with very positive attitudes about beef was down significantly from the summer of 2011.
That should be chilling news for anyone banking on the future of beef.
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A separate checkoff-funded study last May underscored that price and nutrition concerns continue to be the key limiters to beef consumption. But, consumers can be persuaded to increase beef usage with more value.
In the study, smaller portion size appeared to be a motivator for increased beef usage. Consider that U.S. households of 1-2 persons now comprise 62% of all households.
More than 20% said they limit beef consumption because of concerns about factory farming. You can add to that the short list of other challenges and opportunities the beef industry faces, such as convenience, ethnic variety, preparation education and dependability.
As it is, for the first time in 50 years, pork production is expected to eclipse beef production in the fourth quarter of this year, according to the U.S. Baseline Briefing Book from the Food and Agricultural Policy Institute at the University of Missouri. Per-capita beef consumption, estimated at 55 lbs. this year, is projected to decline steadily to 52.2 lbs. in 2022.
Promo picture courtesy of Beef Checkoff.
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