Follow the dollars

Beef Demand

My recent columns, highlighting the importance of beef demand, include this statement: “It always has been and continues to be the difference maker. Consumers are the business – the market makers, not government mandates or programs.”

However, there remains a pervasive thought the market’s achievements during the past several years have been supply-driven. That makes sense; after all, cow numbers are historically low. Yet, that has not been the case – fed beef production has remained surprisingly robust even in the face of lower numbers ( see Demand The Difference Maker ).

Meanwhile, industry cynics dismiss the importance of building demand over time. They often attribute a $200+ fed market or $280 feeder cattle to something other than demand.

Beef Spending

Let’s review the facts. First, 2024 beef spending was extraordinary. As detailed in data from 210Analytics , retail meat spending increased $4.58B (or 6.7%) from 2023. Beef captured nearly 78 cents of every new dollar spent on meat in 2024. Consumers are sending a clear message about their preferences when it comes to meat purchases.

Correspondingly, consumers established yet another new record in 2024: per capita beef spending surged to nearly $490. Multiplied by 336M people, that equates to nearly $165B entering the industry - up nearly $10B versus 2023. (Meanwhile, beef exports tack on an additional $10.5B of revenue as discussed here ).

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Tying It Together

The data best illustrates why efforts on building demand (improved quality and consistency, coupled with effective promotion) are so important. The graph below details annual fed cattle market averages plotted against annual consumer spending. The correlation equals .91!

COOL proponents harken back to ’14 and ’15 fed cattle prices. Their focus is only on the vertical axis (fed market) – thereby avoiding the relationship to the horizontal axis (spending). As explained in the previous column , much of the market’s boost during that period stemmed from declining production. However, during the last two years, fed prices have again surged above the regression line (positive deviations) – this time on a bigger volume!

The table below depicts domestic spending growth along with the corresponding average Consumer Price Index increase (and fed price changes). Several items are important:

1. COOL did NOT substantively change spending growth. As alluded to above, the largest (both nominal and real) spending gains have occurred in the most recent period.

2. Fed market gains (versus inflation) during COOL (tight supplies) were the same as the last five years; but note that ’20-thru’24 includes:

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a. bigger production (+8% vs COOL years),

b. Covid’s market disruption and,

c. toughest inflation comp of the last 30+ years.

One last thought on inflation. The repeated complaint among consumers involves the increasing cost of food. Given that, one would expect consumers to be trading down when it comes to protein spending (i.e. demand destruction). But they’re trading up - as noted above, beef is gaining market share!

Follow The Dollars

The difference maker for producers over the long run is directly related to building beef demand (lest we forget the ‘80s and ‘90s). It’s a long game that requires an industry commitment to continuous improvement – both in terms of product quality and effective promotion (i.e. Checkoff )

None of today’s market is happenstance. Every dollar that comes into the business is the result of consumer spending on beef – and those dollars are making their way back to cattle. Consumers are the business!