Beef demand stays strong and consumers continue to keep beef in their mealtime plans.

Nevil Speer

January 25, 2016

2 Min Read
Consumers continue to keep beef on their plates

While speaking at a recent cattlemen’s meeting, several questions arose around the relationship of retail pricing power, the 2015 market plunge and beef demand. Primarily, the questions focused on whether or not beef demand in the U.S. remains solid. Clearly, that’s an important concern given weak market action during the second half of 2015.  

As a reminder, aggregate demand is a function of both quantity and price. For any product, demand stems from five key factors: population, income, tastes/preferences, expectations and the price of other goods. For beef, the last item, price of other goods, refers to potential price substitution where consumers trade down to pork and poultry.  

Specific to that discussion, the graph below highlights quarterly beef demand since 1990. Beef has had a solid run of improving demand since it bottomed during the third quarter of 2009. In fact, December 2009 was the last time we traded fed cattle at sub-$80 and marks the cycle low/turning point of the rally leading up to the highs established in 2014 and early-2015. Since that time, beef demand has improved almost 25%. More importantly, the 12-month moving average for 2015 now stands at nearly 93 – the best mark since 1992. 

quarterly beef demand

That’s somewhat counter-intuitive in light of recent market dynamics. However, market action of 2015 underscores how important the supply side has been in the sharp decline. That said, it also underscores how critical the efforts of maintaining and growing beef demand are to overall prosperity For some alternative perspective see the discussion on the reversal of direction in feedyard revenue. 

What are your perceptions around beef demand and its influence on the overall market? What type of market might we have had if demand were weakening? Given consideration of the five factors outlined above, where do you foresee demand going forward?

Leave your thoughts in the comments section below.  

Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.

 

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About the Author(s)

Nevil Speer

Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.

Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
 
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs.  He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
 
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
 
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.

Contact him at [email protected].

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