U.S. Consumers and Beef Demand
With slow economic growth and high beef prices, U.S. consumers’ preference depends on price.
by Kasey Brown for Angus Journal®
NASHVILLE, Tenn. (Feb. 5, 2014) — The U.S. consumer is gaining confidence in the economy, but as beef prices continue to skyrocket, retail beef demand should be steady in 2014, said Kevin Good, senior analyst with CattleFax. He spoke Feb. 5 to attendees of the CattleFax Outlook session at the 2014 Cattle Industry Convention in Nashville, Tenn.
“Bred stock prices are projected to be up by 25%, or $200 to $300 per head, in 2014,” Kevin Good stated.
The U.S. economy has performed mostly below the historical growth rate of 3.1% throughout 2013, Good noted, but stronger performance is expected in 2014. This confidence is likely coming from a 20% increase in the stock market, better home values, and smaller monthly personal debt payments, he explained. However, real personal income — excluding government payments — in 2013 is only 1.3% higher than the previous year, and consumer inflation was up 1.5%.
Emerging global markets will continue to bid aggressively for U.S. beef in 2014, he said. Yet, record-high wholesale beef prices mean the industry will struggle to be competitive with the pork and poultry industries. Differentiation through unique beef cuts and promotions will be necessary to grocery stores to increase traffic.
Restaurants are expected to continue expansion in 2014, Good said. Tighter non-fed beef supplies will lead to higher wholesale grind prices, so the margins of hamburger and specialty-hamburger restaurants will be challenged. This should cause end-cut demand to increase. He predicted quick-serve or casual restaurants to stay steady, though fine-dining and fast-casual restaurants should see more growth in 2014. Fine dining should increase, which will support middle-meat demand and premium-Choice and higher cutout values.
High beef prices and smaller supply mean demand is dependent upon whether consumers are willing to pay higher prices, Good said. “The forecast for end-meat values is significantly higher as tighter 2014 lean-beef trimming supplies will force ground-beef manufacturers to buy chuck and round cuts to meet demand.”
Competing proteins look positive on a price comparison. The chicken industry is in a mild expansion phase, he explained. The 2014 price forecast is 1.5% higher than last year, which he said implies a demand increase of 4%. Retail pork prices will increase with steady to slightly larger supplies, which should result in a 4% demand increase, too. However, the porcine epidemic diarrhea virus (PEDv) is limiting the possibility of much herd expansion.
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