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Beef Checkoff: Does it affect demand and price?

Take a look at the metrics for cattle prices, and it’s easy to see how effective the Beef Checkoff has been.

Nevil Speer

February 6, 2020

2 Min Read
Beef Checkoff: Does it affect demand and price?
Nevil Speer

The recent news surrounding the court ruling allowing 15 state beef councils to continue operating is an important development. Most significantly, it draws renewed attention to the importance of the checkoff to beef’s competitive position in the marketplace – and the real impact it makes for cattle markets. 

With that in mind, this week’s illustration highlights the positive influence of the Beef Checkoff for beef producers over time. The graph depicts annual commercial beef production and fed price average since 1998, the year marking an all-time low for beef demand. Clearly, fed prices ebb and flow with supply. However, there are several key aspects that illustrate the influence of growing demand over time.

For example, 2019 commercial beef production totaled 27.2 billion pounds – roughly on par with 2002. At the same time, the average fed price in 2019 equaled $117 per cwt, even with the negative market influence stemming from the fire at Tyson’s Holcomb plant. That level is $50 per cwt better than 2002. That didn’t just happen. 

 Does it affect demand and price?

Food inflation also has some influence over time. However, note that the 2002 price is right in line with the inflation-adjusted price; meanwhile, 2019’s actual fed market surpassed the inflation expectation by more than $17 per cwt. 

Related:Pack your bags and head for Europe! There’s pent up demand for U.S. fed beef in the EU

The difference is largely explained by improving beef demand in the past two decades. Otherwise, the fed price would have remained right in line with inflation and nothing more. A similar comparison could be made between 2017 and 2001. 

The key takeaway being that favorable demand influence ultimately makes its way into the fed market and subsequently back upstream to stocker and cow-calf operations. It's hard to imagine where cattle prices might be in the absence of the Beef Checkoff and ensuing result of improved beef quality and consistency during the past 20 years. The Beef Checkoff has made a very real impact on potential revenue available to beef producers. 

Speer serves as an industry consultant and is based in Bowling Green, Ky. Contact him at [email protected]

About the Author(s)

Nevil Speer

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.

Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
 
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs.  He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
 
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
 
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.

Contact him at [email protected].

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