Feed Me What I Can Afford
There has been plenty of bantering the past couple of decades about the beef industry evolving into a two-tiered system. One tier that’s pricier, value-added, has all of the quality and verification bells and whistles; the other being everything else—commodity beef. Directly or indirectly, these conversations commonly include the inference that producers make the choice which tier to serve, the assumption being the most progressive, business minded will get in the line for quality and value added.
In fact, economic necessity may dictate this kind of tiered system based simply upon the ability of consumers to pay for beef.
Consider the growing wealth gap in the United States.
For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent between 1979 and 2007, according to Trends in the Distribution of Household Income published by the Congressional Budget Office. For the 60 percent of the population in the middle of the income scale (the 21st through 80th percentiles), the growth in average real after-tax household income was just under 40 percent. For the 20 percent of the population with the lowest income, average real after-tax household income was about 18 percent higher in 2007 than it was in 1979.
“The U.S. ranks third among all the advanced economies in the amount of income inequality. The top 1 percent of Americans control nearly a quarter of all the country’s income, the highest share controlled by the top 1 percent since 1928,” according to Stanford University’s Stanford Center on Poverty and Inequality (CPI).
According to CPI, “In 1983, the wealthiest 20 percent of Americans held 81 percent of the wealth. By 2009, they held 87 percent. Currently, more than 25 percent of Americans have zero or negative wealth.”
None of this should be construed as political commentary; these are simply facts that will define and lead the market.
At least anecdotally, the information about income and wealth, in tandem with beef sales during the Great Recession provide some potential insight. As most folks tightened their purse strings, it was ground beef and the lower value end meats that supported wholesale beef values, while demand for the more expensive middle meats languished. Amid economic recovery a more typical pattern emerged with middle meat prices showing more strength than the end meats. Simplistically, a case can be made for the fact that those who have the economic wherewithal to afford beef, have enough jack in their pockets to afford the middle meats at least occasionally. At the other end of the spectrum, as tight supplies push retail beef prices higher, it appears some consumers are getting shut out of beef altogether unless it’s ground beef.
So, it seems logical that a tiered industry could emerge based more on serving a growing dichotomy of domestic consumer wealth, and less on producer’s willingness to manage more or less intensively,
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