Beef demand is critical to understand, appreciate, and assess

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Source: Glynn T. Tonsor, Associate Professor, Department of Agricultural Economics, Kansas State University

As usual, last Friday’s cattle on feed report estimates are being closely examined.  The report estimates may be deemed as slightly bearish as placements were higher than expected while marketings came in lower than anticipated.  As I reviewed related material online, this particular comment caught my attention: “If supply is down why is the live market so poor? Has the demand gone down also?”

Given this comment, I want to take the opportunity to highlight a recently released beef demand study I was fortunate to be part of.  The study was funded by the Cattlemen’s Beef Board and sought to identify beef demand drivers worthy of top priority in industry efforts to build future beef demand domestically.[2]

Key take-away points from this study include:

Ø  To leverage limited resources, the industry should place top priority on areas that both impact demand and are practically feasible to be influenced by collective investment.

Ø  Price, Product Quality, Nutrition, Health, Food Safety, Social Aspects, and Sustainability Aspects are each broad factors that influence beef demand.

Ø  Food safety and product quality are factors that both have significant impact on aggregate demand and are considered feasible for the industry to influence.

Ø  Consumer beef demand affects profitability of all participants in the industry. 

Ø  All industry participants have a role in building and enhancing beef demand.

As suggested by the inquiring comment noted above, both supply and demand factors influence prices realized throughout the supply chain from seedstock produces to retail operators.  Unfortunately the definition and role of beef demand is often confusing leading to misunderstanding of critically important economic concepts.  I encourage readers to take note of the important findings of this study and to make use of the associated resources that include multiple illustrations of what beef demand is (and what it is not).  Long-term industry profitability is substantially influenced by the ability of industry leaders and every contributing participant to maintain and build their understanding of beef demand.

The Markets

Cattle prices last week were mixed depending on the region and weight class examined. The 5-area fed cattle price for the week was $120.93 while Nebraska yearlings traded at $141.20. Corn prices were also up for the week trading at $7.33 in Omaha.

[2] The entire study and associated materials is available at: http://www.beefboard.org/evaluation/130612demanddeterminantstudy.asp



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rick    
June, 25, 2013 at 11:49 PM

Wait, You're telling me that the Packers can get alltime high money for wholesale beef and and at the same time force Feeders to take a $250/hd loss. All your points above are important but not relevant. What is relevant is market concentration. In fact fewer cattle is better for the Packers. It actually gives them more control over the market vs a vs the grocery store chains and given their predominate market position allows them to hold up the Feeders as well.

rick    
June, 25, 2013 at 11:49 PM

Wait, You're telling me that the Packers can get alltime high money for wholesale beef and and at the same time force Feeders to take a $250/hd loss. All your points above are important but not relevant. What is relevant is market concentration. In fact fewer cattle is better for the Packers. It actually gives them more control over the market vs a vs the grocery store chains and given their predominate market position allows them to hold up the Feeders as well.


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