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Beefs and Beliefs

Consumers Keep Trading Away From Beef

Food and other inflation causing consumers to trade down to cheaper beef or even to buy more chicken.

When I was at Kansas State University's Beef Stocker Field Day the week before last I heard ag economist Glynn Tonsor say beef has half the demand today it did in 1980.

He used inflation-adjusted dollars to calculate this. If you want to read his studies on beef demand they are posted at this location on K-State's Ag Manager web site.

That's pretty disturbing news in these economic hard times and now the Beef Board has released a study in its latest Beef Issues Quarterly which shows some more of the difficulties and challenges facing our industry.

This issue focuses on consumer food spending attitudes and confidence or lack thereof. It is a follow-up to a similar study done in 2008 and it shows continued consumer tendencies to trade down to lower-priced beef or trade entirely out of beef to lower-priced chicken.

The study says meat prices increased 7.2% in December compared with year-earlier levels and climbed an average of 7% over the six months preceding January 2011. USDA reported beef prices in May 2011were 10.2% more than May 2010, with steak prices up 6.3% and ground beef prices up 13.6%.

It also said consumers are increasingly pessimistic about the economy and their food-buying habits are reflecting this. In this latest study 60% of consumers said they are price sensitive about food purchases and have changed their buying habits in the face of rising prices.

Specifically, here's a summary statement from the study:

"Consumption of beef has remained steady in absolute terms when comparing 2011 with 2008. However, consumption patterns reveal a shift away from heavy consumption in the direction of light consumption. This trend holds true both in the broader general population as well as among price sensitive consumers.

"In comparison to 2008, currently fewer consumers are trading out of the beef category, a potential indicator that most “price defectors” left the category during the recessionary pressures of 2008/2009. The majority of movement within the beef category is “trading down” – this behavior has increased significantly across all consumption levels. Among the heaviest beef consumers, there is an increase in the proportion of consumers who report they are making no changes in purchase behavior. Again, this may indicate the new normal with consumers retaining the frugal behaviors they developed as a result of recessionary pressures over recent years."

This reminds me of what Olathe-based consultant and economist Bill Helming has been predicting for years: a beef industry dominated by hamburger sales.

We've been talking with Helming recently about this and other of his analyses. Watch the January issue of Beef Producer magazine in your mailbox for more.

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