The Most Recent Beef Demand Numbers and What They Mean | Infographic

The Most Recent Beef Demand Numbers and What They Mean | Infographic

via Chaley Harney, Montana Beef Council

We recently caught up with Glynn Tonsor, Associated Professor, Department of Agricultural Economics at Kansas State University and Gary Brester, Professor, Department of Agricultural Economics and Economics, Montana State University, for an update about beef demand and the role of the checkoff in helping keep demand strong through targeted marketing efforts.

“Sixteen out of the last 17 quarters we’ve had a year-over-year increase, the only exception being the first quarter of this year,” said Tonsor. “And I think a large part of why that’s going on is continued ongoing success of marketing the right products to the right people, and quite frankly, the segment of the public that continues to purchase beef is a slightly different segment than it used to be.”

Tonsor went on to explain that per capita consumption is going down, but we haven’t simply taken away two pounds from every household in the U.S. Tonsor believes the industry is doing better at recognizing that and aligning what they produce with who is able and willing to buy it.

Quarterly All Fresh Retail Beef Demand Index

“And I have no reason to think that’s going to stop in the fourth quarter, said Tonsor. “The increase in the third quarter basically reflects the facts that we had less beef consumed, specifically we had a 4.6 percent decline, and it’s important to recognize that consumption decline is mainly just because we produced less. That’s just we produced less therefore per capita consumption is down. And what actually occurred was we had 11.3 percent increase in price in the third quarter compared to the third quarter 2013.”

Tonsor said despite fairly wide-spread confusion on the topic, per capita consumption is not demand, as consumption alone says little about the value consumers place on beef offerings.

“Demand increased. Basically nobody made the public pay more for those reduced pounds, but they did. And they not only paid more, they paid more than we expected. And that only occurs, what they are doing voluntarily, if they are seeing more value in there than was anticipated.”

Brester added that when we have less to go around, and if people still want the product, meaning demand has not declined, then price has to increase because it is the mechanism that markets use to allocate scarce goods and resources.

“Yes, some people will consume less and some will consume none at all. But as Tonsor said, this is what has to happen if demand has not declined for other reasons such as lower incomes and recession. Higher prices are not an indication that demand has declined. They are an indication that either people want more of the product, or we do not have enough to meet those desires,” said Brester.

Tonsor went on to explain what kinds of things are allowing demand to grow despite the supply challenges, and how the checkoff is playing a vital role in that process.
“It’s a fair statement that the beef industry has done a lot better job of target-marketing products and basically developing new products for the appropriate consumer. The flat iron steak did not exist 10 years ago. That is a product now that brings more value to that carcass than was the case using the same poundage somewhere else before. The beef checkoff was one of multiple supporters in that effort. The mix of muscle cut versus ground is not the same across the country and we have mixed data on this. But the industry is doing a better job of coordinating what segment of the population wants ground beef, what segment wants steak, and sending it to the appropriate markets.”

Brester concluded that “From a Montana perspective, cow-calf producers must keep in mind that consumers want beef, not calves. Hence, when consumers want beef products, their preferences are manifest in higher prices at every level of the marketing chain. Ultimately, the largest impacts from changes in demand are disproportionately manifest in that segment of the marketing channel that is most fixed in supply, that is, the most difficult to expand—calves. Good management practices are rewarding including those that provide value, such as quality, consistency and better health, to the rest of the marketing system.”

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