I am truly worried that the impending drops in per capita beef consumption this year will become one more step down in the long decline of U.S. consumers' beef eating.
Beef consumption looks like it will drop significantly in 2014 in the face of short supplies and high prices. Economists say consumers may cut their beef consumption by up to three pounds.
This is not good news, contrary to what some banter circulating in the industry implies.
Far too often, as a member of the ag press, I get glowing reports from branded beef companies and sometimes from the Beef Board about the wonderful demand for branded beef products. I don't doubt their numbers but what's happening is consumers are buying more branded beef and less nameless, commodity beef. I think it's pretty obvious they're trying to purchase higher quality with their increasingly limited dollars. This is not an increase in overall demand.
The real trends and the ones that concern me are twofold:
• Consumers overall are moving beef purchasing away from whole-muscle cuts and toward ground beef.
• Even moreso the US is posting a long, almost uninterrupted decline in per capita beef consumption.
Private economist-consultant Bill Helming says this has been a 40% decline over 38 years from 1976 to 2013, or just over one percentage point loss per year. By comparison, chicken consumption per person increased 99% over that same 38-year period, which is a gain of more than two percentage points per year.
When we consider pounds of consumption per person instead of percentages, the numbers seem even more revealing. Beef consumption per person decreased 37.9 pounds and chicken consumption per person increased 41.6 pounds. This is almost a pound-for-pound tradeoff as consumers have fled higher-priced beef and migrated to the chicken section of the meat case for their protein shopping.
In a recent newsletter to his clients, Helming adds these points about the major competing proteins in the US. Pork consumption per person 1976-2013 increased a meager 1.4 pounds -- essentially unchanged. Commercial fish and shellfish consumption per person increased only 1.7 pounds in that time -- also unchanged. Turkey consumption per person increased by 7 pounds. When you add all chicken and turkey together it equals 48.6 pounds per person increase for the timeframe.
Total per-capita consumption of the five major protein sources in this country only increased by 13.8 pounds over that entire 38 years and beef was clearly the big loser, while its main competitor, chicken, was the big winner.
This is a price issue, purely and simply.
Helming tells how he spent 17 years on the advisory board of a large, integrated broiler production company in Arkansas. He says the members of the senior management team understood this price relationship well and often told him: "Bill, the rising price of beef at the consumer level is great news for us because we will be able to produce and sell more and more chicken!"
Now Helming is predicting a 3-pound decline in per capita beef consumption this year, USDA's Economic Research Service is predicting a 2.5-pound decline, and Rabobank economist Don Close is predicting a 1-pound decline. If Helming or USDA turn out to be correct, this would be near the all-time record decline for a single year.
This price-founded free-fall comes amid a reeling economy which Helming has correctly called a modern-day depression. Helming notes that the average growth in Gross Domestic Product, which is considered a general indicator of economic health, from 2008-2013 was 0.98%. This compares very poorly even with the 10 years of the Great Depression of 1930-1939, which registered a 1.32% GDP. Per capita consumption of all meat-based proteins during this time has dropped right along with median incomes. The point is, this is not an economy to support anyone's dreams of steak for dinner every Friday night.
As to my earlier comment about the decline in whole-muscle beef sales and the corresponding increase in ground beef sales within the beef complex, Helming has told us and I have written before that these are exactly inverse trends and that large amounts of roasts and rounds from grainfed cattle are being ground for "hamburger."
Helming says we're above 57% of all beef sold in ground form now and climbing. Close says it may be as high as 62%.
Both Helming and Close reiterate that this is further evidence of a problem with price and not with quality or taste.
The increased retail beef prices, which now tie a nearly 30-year-old record according to reporting by the Associated Press, are driven strictly by the shortage in cattle, which was mostly created by the extended drought across much of cattle country.
Helming says, "I want to emphasize 100% of the explanation for those prices is in reduced supply. A lot of people want to attribute the high prices to increased demand and that's simply not so.
"The demand curve for beef is still shifting to the left and that's negative, not positive."
Helming and Close both say part of the solution may lie in better sorting cattle for finishing according to their genetic makeup and feeding them cheaper rations, thereby producing cheaper beef.
Helming rightly says, too, that we have been lead astray with the idea that we're a more efficient industry because we produce more pounds of beef from the feedlot using fewer cows. The problem is those cows consume more forage and produce less pounds of beef per unit of forage consumed than did their counterparts of 50 years ago. At the cow-calf level they are not more efficient.
This is borne out for me in the continuing database kept by Texas economist Stan Bevers. He told me the other day that 2013 is looking like it will set another record for high cow costs.
Bevers has also done a great job of pointing producers back to one of the great truths of beef production: Low-cost producers are always the highest-profit producers.
Somehow we're still not getting the message.
If you'd like to read a special report on beef demand from Bill Helming, click on the link below. To subscribe to his service, contact him at (913) 768-6540.