High Prices Magnify Demand ChallengeHigh Prices Magnify Demand Challenge
“Beef demand in the retail marketplace is going to be the major limiting factor as to how high cattle prices can go,” says Derrell Peel, Oklahoma State University Extension livestock marketing specialist. “It’s going to be what consumers can and are willing
February 22, 2011
“Beef demand in the retail marketplace is going to be the major limiting factor as to how high cattle prices can go,” says Derrell Peel, Oklahoma State University Extension livestock marketing specialist. “It’s going to be what consumers can and are willing to absorb in terms of higher prices for meat. What is going to happen in 2011, more so than the past couple of years, is that the beef industry will be passing the impacts of what we’ve been building toward on to the consumer.”
Already, rocketing commodity costs are weighing on consumer budgets.
Meat prices increased almost 6% during the last year, and dairy prices have risen about 4%, says Mike Walden, a North Carolina State University economist.
“In general, if you look at inflation across everything that we buy, it (inflation) is not a problem. It is running between 1% and 2% annually. But you can always have individual items within that inflation index, some of them going up in price faster others going down. And we’ve certainly had an issue … with some food prices.”
On a retail weight basis calculated per person, consumption of all types of red meat and poultry in the U.S. for 2011 will decline about 2.5 lbs. compared to 2010, according to Livestock Marketing Information Center (LMIC) analysts.
Beef and pork will lead the decline. “U.S. exports of red meat are expected to increase, with the largest tonnage gains in pork, due to robust economic growth in Asia,” say LMIC analysts. “Therefore, U.S. beef consumption in 2011 is forecast to be about 1 lb./person below 2010; pork consumption is expected to drop by about 2 lbs. To give a historical context to those numbers, LMIC has records of calculated U.S. per-capita consumption dating back to 1955. In 2011, beef is forecast to be the smallest during that time frame, with pork forecast to be the lowest since 1976.”
LMIC analysts point out the available supply per person of animal protein has declined every year since 2006, on average. In 2011, the estimated per-person supply and consumption of animal protein will be the smallest since 1991.
Since consumption can’t exceed supply, tighter supplies necessarily mean less consumption. At what price consumers will harvest that supply determines demand.
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