The beef industry needs to identify key areas of consumer demand and address those issues as they expand the herd from an extended decline, said Kansas State University Agricultural Economists Glynn Tonsor and Ted Schroeder in an economic study.
Historically tight cattle and beef supplies, along with four years of expanding demand growth have brought cattle prices to levels many never dreamed possible, and industry leaders need to focus on key areas to leverage the demand into profits. They presented a list of possible things to consider.
A SIGNIFICANT CHALLENGE
But accomplishing that goal of preserving, or even growing, beef demand will be a challenge, Tonsor and Schroeder said. In a best-case scenario, beef prices could increase and overtake even an expanding beef herd similar to what happened in 2004, but they believed herd growth would surpass the current rate of growing beef demand and depress fed cattle prices somewhat.
However, somewhat lower cattle prices may be a workable situation if it’s not excessive. Rising supplies mean more throughput and greater cash flow for possibly greater returns to the bottom line.
OPPORTUNITIES AND PRIORITIES
Tonsor and Schroeder said it was clear to them that beef demand should be at the forefront of industry leader thoughts since declining demand and growing supplies is a recipe for fiscal disaster. They suggested some areas for consideration.
1. Support expanded information regarding demand concepts. Any assessment must clarify what beef demand is and is not, the pair said. Demand-growth strategies depend on understanding these concepts.
2. Assess international demand prospects and identify target countries or regions. For building product demand, nothing works as well as new customers. Building overseas demand for US beef products is one of the most effective and rapid ways to build demand, they said. The industry needs to asses which countries or regions have the most promise for demand growth and target them with short- and long-term demand building.
3. Assess the implications of changes in the composition of US households. From 1940 to 2010, a rising number of households included those with more than one non-family member, single parents with children and a rising median age at first marriage. Even more important are projected population gains, an aging population and growth in minority populations.
DOMESTIC DEMAND CONSIDERATIONS
Since most US beef is consumed in domestic markets, understanding local markets will be key, the economists said.
Age differences are high on the list. Millennials place much higher importance on preparation knowledge, time and ease while those over 65 see price and appearance as more important.
Income levels also play an important role as lower-income households focus on price, while higher-income families look more at nutrition and appearance.
Where beef is purchased also seems to play a role in demand as supercenter shoppers place extra emphasis on total package price, compared with supermarket shoppers.
Wherever market knowledge takes the beef industry, it is becoming clearer that production and marketing efforts increasingly need to be targeted at specific customers, they said.
CASH FED CATTLE TRADE QUIET
No bids were reported from packer buyers in Plains cash markets Wednesday, but asking prices were reported around $146 per cwt on a live basis and $225 on a dressed basis. Prices last week were lower with live-basis trades ranging from $140 to $143 per cwt and dressed-basis transactions at $220 to $223.
The USDA reported firmer boxed beef prices Wednesday with its choice cutout up $0.31 per cwt at $239.47 but select up $0.05 at $228.70 with 130 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Tuesday was $205.71, up $0.23. This compares with the Sep settlement Wednesday of $203.82, down $0.47.