Tracking beef industry dollars

Abstract Text: The wave of higher prices within the beef complex during the past several years is unprecedented.   Historically, amidst uneven economic recovery, beef expenditures would typically have been flat-to-negative as consumers traded down within the beef category and/or traded across to less expensive competitive proteins.   Nevertheless, despite persistent drag on the economy since the financial crisis, beef and cattle prices have surged higher.   That occurrence, though, has invoked concerns around consumer resistance and potential for demand destruction.   Those questions have been especially prevalent during 2014 as beef prices surge ahead of competitive proteins.  Additionally, considering that cattle prices have doubled in just five years since some observers express further concern about the market being overstretched and poised for a sharp pullback –consistent with the behavior of most commodity markets.  The upshot being discussion about the need for renewed analysis of current production systems, industry value incentives and their subsequent impact upon consumer prices.   Ground beef is the industry’s volume leader – representing upwards of 50-60% of all beef consumed in the U.S. - and often positioned as the primary price-category offering for beef directly comparable to pork and poultry.  Given those considerations, dialogue has arisen around the prudence of tilting the production emphasis towards ground beef.   However, beginning in 2014, new USDA boxed beef reports indicate ground beef and trimmings comprise only about 20% of the cutout value.   Moreover, the industry’s move away from a less-commoditized perspective have paid significant dividends during the past several years and served to underpin beef’s competitiveness.   Primarily, high-quality, differentiated beef products are accounting for an-ever larger portion of the beef industry’s total revenue.  The sales mix of Prime and Branded categories have gained market share during the past five years.   That results in customers buying more beef at higher prices on a consistent basis.   That occurrence inherently helps to break free from a more traditional commodity business and buffer it against quality shortfalls that historically hampered the beef business.

Keywords: beef industry, beef prices, cattle prices