May 16, 2017
Fake news doesn’t happen just in politics –- agriculture has its fair share, too. That reality was on full display recently by the Natural Resources Defense Council (NRDC) around its new report, “Less Beef, Less Carbon.”
NRDC’s press release explained that: “Less Beef, Less Carbon…shows that between 2005 and 2014, we reduced our per capita consumption of beef by 19%.” The report contends that because Americans ate less beef between 2005 and 2014, we have effectively “avoided the equivalent of the annual tailpipe emissions of approximately 39 million cars.”
The report’s slant shouldn’t be surprising. After all, the agency contends that, “Raising animals for food puts an enormous strain on the health of our communities and the natural environment.” The National Cattlemen’s Beef Assn. responded appropriately to the report, noting the connection between beef consumption and automobile emissions is “fallacious.”
More troubling, though, is the general ambiguity regarding the underlying cause for declining beef consumption in the U.S. There’s no meaningful explanation provided within the report as to why beef consumption has declined. As such, it intentionally leaves the door open for errant interpretations.
The report is correct: per capita beef consumption did indeed decline between 2005 and 2014. Consumption, as measured by U.S. Department of Agricutlure (the source of NRDC’s data), reflects disappearance when accounting for total production, imports and exports, and ending stocks. Stated another way, consumption is merely a measurement of sales volume, and consumption fell during those years largely resulting from declining beef production.
But that measure doesn’t give us insight into the mind of the consumer and thus doesn’t reflect what’s really going on in the marketplace. That requires some assessment of beef demand -- the real economic reflection of consumer perception. Demand is a function of both supply AND price. In other words, even with smaller supply, if consumers aren’t favorable toward beef, there’ll be little pricing power to clear the market.
Consumer purchases are never made in isolation (true for any product). That is, the decision to purchase is based upon consumer evaluation of the relative price / value relationship, and that typically involves comparison among competing products (in this case most often pork and poultry). That is, consumers appraise price versus assigned value across various options and then make a decision based on the outcome of that assessment.
Beef’s pricing power has been nothing short of remarkable in recent years. The beef industry has enjoyed an incredible run and stretched retail prices to new all-time records. But if consumer perception and subsequent beef demand hadn’t improved, those higher prices couldn’t have been passed to consumers. They would have opted out from purchasing beef in favor of other alternatives.
What’s more, the relative strength and sustainability for any business or industry depends upon its ability to generate revenue. That critical measure (along with profitability) is more important than simply measuring sales volume (in this instance, consumption). Stated another way, a business or an industry can produce and sell lots of volume, but if can’t generate money from those sales, then there’s inherent weakness in the model. That’s why equity analysts are always concerned about a company’s topline (revenue) growth and year-over-year sales comps.
To that end, per capita beef spending in 2010 was approximately $261, in 2015 that measure reached $340! Meanwhile, the U.S. population was about 309- vs 321-million persons in 2010 and 2015, respectively. Doing some quick math, that means U.S. beef spending increased nearly $28.5 billion in just five years. The beef industry has proven its ability to successfully capture new spending at an increasing rate.
NRDC conveniently ignores those facts; rather, the organization clings to squishy, anti-beef explanations to fit its activist narrative. Sujatha Bergen, NRDC policy specialist, tried to explain declining consumption as a ‘welcome side effect’ of a growing anti-beef sentiment in the U.S. –- wanting us to believe consumers are choosing NOT to eat beef because it allegedly harms the planet.
That’s disingenuous: disparaging general consumer perception of the U.S. beef industry is just plain wrong. The real story is a favorable one for the beef industry. That’s the result of committed work during the past 20 years, resulting in an industry that’s increasingly responsive to consumer demands. As a result, consumers continue to reward the beef industry for their efforts with their dollars. In the end, that’s the only measure of business success that matters.
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