This week, I wish to deal with elements impacting client demand for beef. It’s necessary to proceed final week’s dialogue as a result of beef demand shall be one of the vital necessary issues to watch in 2023. Provide fundamentals will assist cattle costs subsequent 12 months, however there may be nonetheless uncertainty about what client demand will seem like, largely reflecting macroeconomic considerations.
The costs of enhances and substitutes will have an effect on beef demand. The 2 most important competing proteins for beef are pork and rooster. The primary graph above reveals common retail meat costs for beef, pork, and rooster. These are composite costs and don’t mirror the worth of any particular lower. In October, all contemporary beef averaged $7.25/lb. Retail pork and rooster averaged $5.05/lb and $2.54/lb, respectively.
One concern is that buyers will substitute away from beef as a result of beef costs are close to report highs. Sure, beef is the most costly of the three proteins in absolute phrases. Nonetheless, what issues for beef demand is relative costs. That’s, beef’s worth relative to pork and poultry (see the second determine beneath). If the relative worth of beef will increase, customers will substitute beef for different proteins, all else fixed.
One solution to look at the relative worth competitiveness of beef is to take a look at retail worth ratios – for instance, the worth of beef divided by the worth of rooster. The second graph reveals relative beef costs. Will increase within the ratios imply that beef is changing into much less worth aggressive and reduces imply that beef is extra worth aggressive. In October, the meat/rooster worth ratio was 2.9, which implies that a pound of beef is 2.9 occasions costlier than a pound of rooster. Discover that in 2022, beef has turn out to be extra worth aggressive relative to rooster. Since 2015, the meat/pork relationship has remained comparatively fixed.
Non-price elements like client tastes and preferences are equally necessary for beef demand. The Ok-State Meat Demand Monitor tracks the relative significance of a number of meat protein attributes utilizing month-to-month client surveys. Outcomes persistently present that style, freshness, worth, and security are the highest 4 elements for customers when buying protein (see the third determine). The implication is that beef demand prospects stay optimistic so long as the cattle business continues to align itself with client desire and takes strategic steps to supply a product that hits the mark on the elements highlighted within the third determine.
Supply: College of Arkansas
