Beef Demand Remains Strong

Consumer confidence in beef hasn't decreased in the wake of BSE.

Since the news that a cow in Washington state was diagnosed with bovine spongiform encephalopathy (BSE) the consumer media has barraged the public with intense and emotionally-charged coverage. The beef industry's fear is that this coverage will convert, in consumers' minds, what is an animal health issue into a public health issue, and negatively affect consumer confidence in beef.

So far, that doesn't seem to be the case. Preliminary indications are U.S. consumers are sticking with beef.

A random survey of meat consumers was conducted Dec. 29-30 using beef checkoff dollars. This survey has been done since 1996 to gauge consumer awareness of BSE and report consumer confidence U.S. beef safety. The latest survey showed 96% of Americans have heard news on BSE, which is the highest awareness the public has had since the surveys began (see Table 1).

“We expected the awareness of BSE to be extremely high, because back in the first half of 2001 there was a tremendous amount of media coverage in this country about this epidemic in Europe,” says Rick McCarty, executive director of issues management for the National Cattlemen's Beef Association. “We found a93% awareness level in April 2001 and we didn't even have it in the U.S.”

The awareness level of BSE hasn't shaken the public's confidence level — 89% of respondents in this latest survey feel that U.S. beef is safe to eat (see Table 2). This compares to the same survey in September 2003, when 61% of respondents reported hearing about BSE in the news and 88% were confident that U.S. beef was safe and wholesome.

“We expected [the confidence level] to be high, but we thought it may have softened a bit,” McCarty says. “Instead it stayed rock solid — right where it was.

“In fact, a recent Food Marketing Institute (FMI) poll said BSE wasn't even on the top of people's list of concerns about food safety issues,” he adds.

That FMI study showed that 22% of respondents, or more than one in five, cited media coverage as being “negatively biased.”

Cattle-Fax did not have December meat sales figures from retail and foodservice outlets at press time, but the top fast-food outlets released sales statements.

“Burger King, McDonald's and Wendy's have come out and said that first weekend after the announcement they didn't see any decline in sales attributed to it,” says David Weber, Cattle-Fax. “So far, consumer reaction to it hasn't been much, if any.”

Historical Impacts

While it is hard to speculate on the long-term effects BSE will have on beef demand in the U.S., looking at the history of other food-safety events and the impacts they had on consumer demand shows a consistent trend in long-term impacts. A study, conducted by Tom Marsh, a Kansas State University ag economist , and Nicholas Piggott, a North Carolina State University ag economist, measures short- and long-term reactions of consumers to food safety events covered in the media.

“We defined the food safety effect as a consumer response to an unanticipated outbreak that can lead to immediate acute, chronic or fatal illness,” Marsh says.

Two questions Marsh and Piggott asked in their research:

  1. Do consumers interpret public food safety information about meat products as an indication of quality?

  2. Are these impacts only temporary?

“We developed and estimated a consumer demand model using U.S. market level data from 1982-1999,” Marsh says. “This consumer demand model included beef, pork and poultry. To measure public food-safety events (information) we went to Lexis Nexis, which has kept over that time period a log of the top 50 English language newspapers.”

The information on price and quantity of meats sold came from USDA.

The researchers searched newspapers from 1982-1999 and catalogued the number of articles associated with each food-safety event.

He says that, on average, a 10% increase in beef safety information resulted in a 0.144% direct decline in consumer demand for beef. These food-safety effects are small in comparison to price effects.

“For example, using price effects on beef, if price of beef increased by 10%, the elasticity would suggest that quantity of beef demanded would decrease by 9%,” Marsh says. “Where you see the difference in the food-safety effect is that if food safety information increased by 10%, there would only be a decline in demand on average of 0.144%.”

Long-term Effects On Demand

Marsh says the USDA data they examined was quarterly. When comparing data between quarters, he says, they found any impact on demand only lasted in that quarter with no negative long-term effects.

“There was only a temporary impact and there were no lag effects, so it was very short term,” he says. After media attention dissipated, consumer demand picked back up.

“Given our past information, for an isolated BSE case, I suspect we will see a small shift down in consumer demand potentially, but it shouldn't be long run — it should be a short term response if it happens at all,” Marsh says. “Why I say that is because with the ban on exports this event has forced prices down due to an immediate increase in domestic supply of beef and consumers may purchase more beef because of that.”