Demand issues still impacting beef market

News
Jul 8, 2011
by WLJ

Some people might say the past 30 years have been unkind to the U.S. beef industry. Buffeted by a sharp drop in exports in 2004, stiff competition from a marketing-savvy poultry industry, and occasional news of recalls, the industry continues to grapple with U.S. beef demand that is well below where it was 30 years ago, according to two Kansas State University (K-State) agricultural economists.

Glynn Tonsor, livestock marketing specialist with K-State Research and Extension, said that beef consumption per capita in 2010 was 59.6 pounds, down from 76.6 pounds in 1980 while inflation-adjusted beef prices actually declined from 1980 to 2010. Tonsor, along with K-State distinguished professor of agricultural economics Ted Schroeder, spoke to scientists and students attending the recent American Meat Science Association Reciprocal Meat Conference hosted by K-State.

Tonsor cited a USDA outlook report that predicted by 2018, poultry consumption will outpace beef and pork consumption combined. Research regarding drivers of this long-run trend in domestic beef demand was highlighted in Tonsor’s remarks.

Schroeder said, however, that growing population and income in some parts of the world, particularly China, represent lucrative market potential for U.S. producers. However, he noted that potential is fragile. For instance, Schroeder said that the U.S. beef industry is still recovering from the discovery of bovine spongiform encephalopathy (BSE) in North America in late 2003. The incidences sparked consumer concerns about beef that led to significant trade disruptions.

“Seven years later, we’re still trying to recover,” Schroeder said, adding that the BSE news cost the beef industry $3.7 to $4.2 billion in 2004 alone.

“There’s a question about whether the U.S. will be a major supplier in the global beef market or not,” he said, noting that such countries as Brazil, Canada and Australia are already major players or are positioning themselves to be key beef suppliers to the global market.

The most successful beef suppliers to the world will be cost competitive, a trusted source, accountable, have the ability to consistently supply a safe product, and be politically sensitive to what other countries and cultures want.

The U.S. beef industry can successfully navigate the challenges if it can assure global customers that it can deliver a product they want, which includes product traceability, Schroeder said. He noted that only 10 to 15 percent of U.S. cattle are currently enrolled in verification programs compliant with exporting beef. Conversely, traceability programs are mandatory in most competing beef exporting countries including Brazil, Australia, Canada, New Zealand and Uruguay. — WLJ

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