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Farms.com Home  › News

Dairy Market Drivers: Consumer Demand for Beef; Diesel on the Rise; and Easter Spending in a Minute!

  • Higher gas prices hit consumers right in the wallet, but surging diesel prices are quietly becoming a story as well. Conflict in the Middle East and transportation disruptions through the Strait of Hormuz caused crude oil to leap to nearly $100 a barrel. U.S. gas prices have climbed about 80 cents per gallon from mid-February.
  • But diesel prices jumped even more. The average U.S. diesel price reached $5.38 per gallon the week ending March 28. That was up 51% year-over-year and more than $1.50 per gallon higher than just over a month ago.   
  • Most consumers won’t notice diesel prices at the pump, but they’ll feel it in other ways. More than 70% of domestic freight tonnage is moved by truck. Diesel prices are up about 40% from last month, and Erich Muehlegger at UC Davis estimates that 40% hike will raise freight company costs by about 10%.
  • So, whether it’s groceries or other goods, additional transportation costs will eventually be passed on to consumers. We don’t know how long the Middle East conflict will last, but that lagging effect may make inflation feel persistent, even after energy markets stabilize.
  • Americans are sticking with beef, even at record-high prices. Beef sales volume for February was up 1.3% from a year earlier, according to Circana data, marking 24 consecutive months of year-over-year growth.
  • February’s growth in beef volume sales was the smallest increase since last August, but other meat categories saw negative growth. Despite the lower price tag per pound, pork volume sales were down 2.1% for the month, and chicken fell 1.9%.
  • Consumers are choosing beef at home and when they dine out. In fact, several popular steakhouse chains experienced positive gains even though the overall restaurant environment has been slow growing or stagnant. Longhorn Steakhouse showed 7% growth in same-store sales in the most recent quarter, and Texas Roadhouse reported a 4% year-over-year gain.
  • To meet consumers where they are, some restaurants are adapting their menu offerings. By incorporating lower-grade cuts of beef and various tenderizing methods, diners can fulfill their steak craving without necessarily paying top dollar.
  • This love of beef is good news for dairy farmers who are breeding with beef sires to capitalize on higher calf prices. Cull cow and bull calf sales used to represent less than 5% of total milk plus beef income. Today, we estimate beef sales account for nearly 17% of an operation’s revenue, helping support the financial bottom line for many dairies.
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