From January through September 1999 consumer spending on beef was up $1.4 billion, compared to $467 million in all of 1998. Beef captured 30% of new spending on red meat and poultry in 1999, up from just 10% from 1980-98. Consumers are buying more beef at higher prices, despite record-high supplies.
Is this the end of the 20-year slide in beef demand? And, what's behind it? What's behind the surge, says economist Andy Gottschalk, are the seven following factors, ranked in priority:
* A full employment economy.
* Rising real wages at all income levels.
* Wealth creation by an appreciation in housing and stock values.
* Peaked consumer concerns regarding fat consumption that is being replaced by a taste preference.
* A decline in negative press regarding beef and meat consumption.
* A revival in the Pacific Rim.
* New, high quality and more convenient beef product offerings.
The challenge to beef producers, says the economist with LFG, L.L.C., of Englewood, CO., is to move the final point listed above to the top of the list.
"The beef industry's challenge is to permanently capture this increased share of new consumer spending on red meat and poultry," he told attendees of the Range Beef Cow Symposium in Greeley, CO, in early December.
He congratulated the industry for the progress made in producing more beef products with consistency, quality and convenience attributes.
"But this isn't the reason, folks, that you have $70 cattle," Gottschalk says. "But, if we continue to invest in R&D and add value to this product, it will lay the foundation for the growth of this industry for generations to come."
That opportunity, he says, exists in better serving the needs of the consumer and better utilizing the entire beef carcass.
"New product development (especially to the chuck and round) that increases the overall value of beef, would result in increased consumer demand and is essential to achieving this goal. During this process, costs must also be reduced because value is a multi-function that is determined by price and quality."
He lists the beef industry's top priorities as being:
* Lowering costs.
* Improving quality.
* Improving consistency.
* Improving convenience.
* Food safety.
Demand is excellent for the middle meats, he points out. The rib and the loin continue to get stronger. They sell themselves because there's a higher degree of consistency in those products, they're easy to throw on a grill and they're also key items at the restaurant level.
The chuck and the round meanwhile, have continued to decline relative to the total value of beef. There, Gottschalk says, lies tremendous opportunity.
And, it's in the U.S. domestic market where U.S. beef producers will make or break their industry, Gottschalk says. Exports, imports, concentration, alliances - none of it makes a difference, he says.
Total meat production is up 16.5 billion lbs. since 1990, and 13.4 billion lbs. is the competition. Gottschalk adds that the net change in imports in 1999 vs. 1998 - including live cattle converted to processed pounds, plus all the processed pounds that are imported - was 280 million lbs.
"I don't believe there is one person in this room," he said, "that believes this 280-million-lb. change in imports had a greater impact than (a growth of) 13.4 billion lbs. in competing meats."
He points out that exports represent only 9% of total U.S. beef production.
"The domestic market, in its simplest terms, is 10 times greater than the export market. For every $1 increase in domestic per capita beef spending, the beef industry gains $270 million.
"Where do you want to spend your money? I want to spend my money right here where we have the people, especially the economy that we have today, that can afford your product. That's what is driving demand today," Gottschalk says.
He's convinced that vertical coordination and cooperation among beef industry segments will accelerate, and beef alliances will continue to evolve.
"They are not the cause of the lower prices experienced in recent years, Gottschalk points out.
"Rather, they are a vital link necessary to permanently restore beef demand and allow this industry to effectively challenge the competition."
Gottschalk is enthusiastic about the future.
"It's extremely bright if you grasp the opportunity that's ahead of you," he says. "We're living in the most dynamic era in the history of the world. What is going to unfold in the future on a worldwide basis is beyond comprehension. Technology and its impact on people's ability to educate themselves, and the direct correlation between education and income, can drive demand to levels that we can't even comprehend," he says.