As beef prices skyrocket, how will our consumers be able to afford our product, and what does that mean for beef producers?
It’s certainly a good time for the beef industry. Bull sales have been on fire. Cull cows are worth a pretty penny. Just try buying a bred heifer these days; an open cow is pretty costly to replace. Last week at my local auction barn, fed cattle were going for $153/cwt. It’s an exciting time to be in the cattle business, but how are these high prices impacting our consumer?
When I read articles that report chicken is surpassing beef in sales, I honestly can understand why. Taste superiority aside, chicken wins hands down when it comes to sticking to a budget. I can buy a whole fresh chicken at the low price of $0.69/lb., but a pound of 93% lean ground beef will run me $4.99/lb. And if you’re looking to buy a decent steak at the grocery store, you better have your pennies stacked up. A New York Strip costs $12.99/lb.!
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Without a doubt, our beef-loving consumers are starting to feel the pinch, and this can’t bode well for the future of our product.
Yesterday, TIME magazine carried an article entitled, “Beef, It’s What’s No Longer Affordable For Dinner,” written by Brad Tuttle.
Tuttle writes, “Regardless of the fact that rising beef prices make sense and shouldn’t really come as a surprise, shoppers and restaurant owners are being smacked with sticker shock lately when attempting to round up brisket, steaks, chuck, ground beef, and pretty much every other part of the cow. In the most recent USDA report, the average retail price of fresh beef was measured at $5.04/lb., up more than 50¢ over a two-year span and the highest price ever recorded.
“What’s especially alarming to consumers is that beef prices have continued on their upward trajectory through the early part of the year, a period that is traditionally a lull in the market in between two peak demand times, the winter holidays and summer barbecue season. Analysts expect that it will be several years before America’s cattle herds increase substantially in size. Until then, we should get used to the idea that beef prices will keep soaring, perhaps at a rate of 7% or 8% per year.”
Despite high prices, beef has continued to fare well in the market. As BEEF Cow-Calf Weekly columnist Troy Marshall pointed out in his Jan. 23 piece, “Did You Ever Think You’d See $1.50 Fed Cattle?” virtually everyone was surprised by beef’s demand strength last year, while pork and poultry struggled.
He attributed some of the strength to further liberalization of the Japanese market, and added this: “I also think we’re finding that, at today’s lower consumption levels (for beef) , consumers are not nearly as willing as they were previously to substitute.” He goes on to say: “When Americans were consuming 70 lbs. of beef on a per-capita basis, I think consumers were more price-sensitive and willing to exchange other proteins for beef. At today’s per-capita consumption levels, however, they aren’t as willing to substitute. And if that continues, we should be bullish regarding our ability to sustain these heady price levels for quite some time.”
Time will tell which way consumers ultimately roll, but what is the price point at which beef consumers balk? What strategies should we employ to broaden beef’s retail appeal and keep it at the center of the plate? Share your thoughts and suggestions in the comments section below.
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