Beef Study Results Indicate Recent Demand Slowdown Linked to Economy

After a several-year resurgence that started in 1999, beef demand has slowed, thanks in part to a struggling economy both in the U.S. and abroad.

“A lot of what’s happened with the recent slowdown in demand is due to macroeconomics,” said James Mintert, agricultural economist at Kansas State University Research and Extension and one of the authors of a new study on beef demand. “Much of this is out of the (beef) industry’s control, but there are things the industry can work on to reinforce demand.”

Other agricultural economists involved with the study were Ted Schroeder of K-State and Glynn Tonsor of Michigan State University. The study, designed to provide a comprehensive and updated assessment of factors influencing U.S. consumer demand for beef, was funded by the Cattlemen’s Beef Board and several state beef councils.

The research revealed that beef demand is responsive to changes in consumer expenditures on goods and services, Mintert said. On average, a 1 percent increase in U.S. consumer total expenditures results in a 0.9 percent increase in the quantity of beef demanded. The study indicated that, from 1982 through 2007, beef demand benefitted from increases in consumer incomes and from consumer willingness to increase consumption expenditures even more rapidly than income was increasing.

The weakness in the U.S. macroeconomic outlook for 2009 and the ensuing expected decline in per capita consumer income does not bode well for beef demand this year, he said.

“Moreover, the impact of weaker consumer income is expected to be compounded by consumers’ desire to increase savings in response to uncertainty and risk present in the financial and real estate markets,” Mintert said. “An increase in consumer savings means consumption expenditures will decline even more rapidly than income and, given the importance of consumer expenditures, a decline in U.S. retail beef demand is likely during 2009.” Mintert noted that, based upon the beef domestic retail demand index, U.S. consumer demand for beef declined about 4 percent during 2008.

The study indicated that it is unlikely that domestic beef demand will rebound until the U.S. economy strengthens and consumers regain enough confidence to spend more of their income.

“Since the beef industry can do little to change the industry-wide effect of the economy on beef demand, it is important to focus resources in areas where noticeable impacts are possible, such as focusing efforts on beef’s nutritional strengths, food safety and introduction of new products that are convenient to prepare,” Mintert said.