While the broader news media has focused upon retail prices, there’s also been lots of discussion around the beef industry’s sharp reduction in production during over the past 10-15 years. Within that context, conventional wisdom generally attributes one single factor to higher prices – declining supply. Accordingly, per-capita beef consumption has also declined.

With that said, an analysis of consumption alone isn’t very reflective of consumer perception of beef and/or beef products. It really tells us nothing about the price/value relationship when consumers make beef purchases.

A more accurate measure of beef competitiveness is reflected by the beef demand index. Demand reflects both supply and price. In other words, even with low supply, if consumers aren’t favorable toward beef, there’s little pricing power to clear the market. The accompanying illustration highlights the differences.

Steady consumption does NOT mean steady demand; nor does declining consumption reflect declining demand. In fact, consumption has declined during the past several years while demand has improved. Stated another way, supply has helped stretch the market to a series of new record-highs this year. However, higher prices can’t be passed on if consumers favor the competitors (pork/poultry). Beef’s pricing power has been formidable during the past several years – the direct result of better demand. That all translates into real expenditures.

Demand has been steadily improving during the past several years – quarter by quarter. How do you perceive the importance of beef demand on the overall market and beef industry prosperity? Are you surprised by beef’s pricing power in recent years? What’s your assessment of the potential for demand growth in coming years? Leave your thoughts in the comments section below.

Nevil Speer serves as a private industry consultant. He is based in Bowling Green, KY, and can be reached at [email protected].

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