By Bernt Nelson
Memorial Day is first and foremost a time for Americans to honor the men and women who died serving our country. It has also become the unofficial kick-off to summer – and grilling season, stimulating demand for all types of animal proteins, including beef.
U.S. demand for beef has remained strong even as beef prices hit record highs. With economic uncertainty growing, however, how long can this strong demand continue? This Market Intel will analyze the challenges facing beef demand, what it means for farmers and ranchers, and what consumers can expect for the unofficial start of summer.
What Fuels Demand?
Demand is the amount of a product consumers will purchase over a range of prices. In terms of the market for beef, demand is consumers’ financial ability and willingness, or desire, to purchase beef over other animal proteins, such as pork, poultry, or seafood.
Strong demand usually leads to higher retail prices. In the case of beef, this means higher prices paid for wholesale, which means higher prices for fed cattle, feeder cattle, and even new calves. Cattle supplies are currently at a 74-year low, and while tight supplies have been a major factor driving up cattle and beef prices, demand is the other part of the equation. With the supply side largely fixed, U.S. demand for beef is the lynchpin holding together razor thin profit margins for our nation’s cattle farmers and ranchers. If demand weakens, cattle prices will likely decline, creating a major obstacle to any meaningful expansion of the U.S. cattle herd.
How is Demand Measured?
Measuring demand can be tricky, but there are some tools that can help. USDA has several publications that help shed light on the consumer’s willingness to buy beef. Most of these utilize how much beef is being consumed at a certain price level.
One of the foundational tools used to measure demand is the USDA National Agricultural Statistics Service’s (NASS) monthly World Agricultural Supply and Demand Estimates (WASDE). While the WASDE report is more commonly known for grains and oilseeds, it also contains a lot of information on meat including “disappearance.” Disappearance refers to the estimated amount of a product, like beef, that is used domestically over a period of time, based on production, imports, exports and changes in storage. In the May WASDE report, USDA estimated that 2025 consumption of beef will be 28.91 billion pounds. This forecast is down about 49 million or 1.4% from last month and down just 0.5% from last year. This means USDA is forecasting a minimal slowdown in beef consumption compared to last year. This forecast predicts strong demand through 2025.
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