Quality keeps consumers putting beef on the dinner plate
Cheyenne – Safeway ran a special on the front page of their Denver-area advertisement the week before Thanksgiving selling bone-in New York strip steaks for $4.67 a pound with a club card. At $4.67 a pound, consumers could buy strip steak for less than they could 10 years ago.
The bigger question from this advertisement was, how often is beef featured on the front page and above a turkey advertisement the week before Thanksgiving?
Jim Robb, senior agricultural economist with the Livestock Marketing Information Center, told beef producers during the Range Beef Cow Symposium in Cheyenne that the retail market is changing as retailers like Safeway try to find ways to compete with home delivery retailers like Amazon.
Featuring beef in retail markets is contributing to the higher prices the beef industry is presently enjoying, he said.
“If consumers are going to pay a premium to consume beef, they will expect a quality product. If we plan to cut costs, don’t sacrifice the quality of the product we produce,” he cautioned the group.
“The U.S. economy is growing, and consumer sentiment is as good as it was in 2003-04,” he said. “Unemployment is as low as it has been in years, and consumer income is going up. It is creating an economic environment that is favorable to the beef industry.”
“The market is much better than we thought it would be a year ago at this time,” he added.
The packer margin was the best ever in history in 2016, and 2017 is even better, Robb continued. The spread between wholesale and retail prices shows that retailers have started to feature beef, and that has caused the retail margin to go down.
“They are featuring beef products to get people into the retail stores,” Robb explained. “In a modern world, how do we compete with home delivery? What do retail stores have to offer? The retail industry has become very competitive over consumers, and they are using beef to get people to come into the stores.”
“Safeway has said they are surprised, when they feature beef, how many more people come into the store and how much beef they can sell. This plays a major part in the story of how the cattle market got to where it is now,” he explained.
The pet food isle is also changing the marketplace.
“The pet food section is growing. Part of it is fresh, and the rest is frozen items,” Robb explained. “Millenials pay more per pound to feed their pets than they do their newborn children.”
Per capita consumption of beef in the U.S. has decreased, and more beef is being exported.
“Per capita consumption is not demand,” Robb stressed.
“Beef is very susceptible to demand and the macro-economy, more so than pork or chicken,” he explained. “Presently, beef demand is growing faster than the economy. The beef demand profile is as good as it was in 2004, but it didn’t get us the cattle market we have today, although the domestic consumer has helped.”
The biggest issue in the meat animal industry is the sheer amount of total red meat and poultry we are growing in the U.S., he said.
“We are producing record amounts of animal proteins,” Robb said. “It is not an issue, except for how much we are going to ask people to eat.”
He added, “In 2018, we are asking people to consume nearly 219 pounds on a retail weight basis. We have to get something going to move the largest amount of meat we have produced since 2007. It is a big risk in the marketplace.”
Calf prices strong
Robb noted calf prices are also stronger than a year ago, which has been a pleasant surprise.
“A lot of things have come together to give us a stronger market than we had a year ago,” he explained.
In 2017, the markets have been closer to normal and are adjusting to the economic realities of recent years. In the fourth quarter of 2016, Southern Plains steer calves averaged $1.38. This year, steers are higher at $1.68.
“We have a dynamic marketplace, but unless something happens in the market, prices will be pretty normal,” Robb suggested. “Prices are nearer to the bottom than they were. This market, in the next couple years, is turning. We expect lower prices the next two years, but prices may be stronger for calves by 2020 -21.”
Robb predicts $1.43 in the Southern Plains for steer calves in 2018-19.
The ability of the market system to move cattle through has contributed to better cattle prices.
“Essentially, for the first time since 2003, the market pulled the animals through the feedlots,” Robb said. “That has held the weights down, along with a strong demand for cattle. Usually, we are trying to push animals through the marketing system.”
Cull cow prices are currently at a seasonal low.
“There is a very good market for products coming out of these cull cows, so if producers have the forage available, I would recommend holding onto them and feeding them awhile,” he said.
“The cattle cycles are still with us,” Robb related. “The calf crop is getting bigger, but we are marketing more cows this year, which may indicate the rate of herd expansion is slowing down.”
He anticipates an increase of one to 1.5 percent for 2018, compared to three percent at the beginning of 2017.
“The herd is still growing at a smaller rate, but it is at a manageable level,” he said.
Gayle Smith is a correspondent for the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.