Americans still love their beef. But they’re not eating anywhere near as much as their parents. This seems a contradiction, but the dramatic decline in per capita beef consumption over the last 35 years has little to do with preference. It’s all about available supplies.
These supplies are calculated by adding together domestic production and imports, subtracting exports, and dividing the total by the latest population figure. Americans in 1976 consumed a hearty 94.3 pounds of beef per person. Production was a record that year, exports were minimal, and the U.S. population was 218 million people.
Consumption has been on a steady decline since then but the trend has accelerated since 2007 as exports continue to increase and, more latterly, imports fell sharply. Also, the U.S. population has grown to nearly 309 million. USDA’s latest forecast is for per capita supplies in 2012 to be 54.3 pounds per person. This is down a startling 3.4 pounds from this year’s forecasted 57.7 pounds and down 10.7 pounds from 2007. The per capita supply might well be the lowest since USDA began calculating it.
Such a decline has enormous implications for all in the U.S. beef chain and consumers. End users, whether at retail or foodservice, will have to compete more for tighter supplies. They will have to pay more for all types of beef and try to pass on the added costs.
Wholesale beef prices are already much higher than at this time last year. USDA’s weekly composite cutout the week ended Oct. 29 was $179.72 per cwt. This was 13.6 percent higher than the same week last year. A similar increase by this time next year would put the cutout at $204.16. Retailers and restaurateurs have attempted this year to minimize price increases to consumers. But retail prices continue to rise. USDA’s All Beef price for September was $4.44 per pound, up 39 cents or 9.6 percent from September 2010.
A similar increase by September next year would put the average price at $4.87 per pound. Such prices could meet resistance from consumers unless the economy has improved significantly by then. Prices might increase sharply well before then. The All Beef retail price would have to advance to $4.83 to fully reflect the price of fed cattle the last week of October ($120.78 per cwt).
The main reason for US- DA’s lower per capita forecast is because of lower production next year. But it also cut 2012 imports and increased its 2012 export forecast.
Its statement came the same day that a rare bipartisan vote by the U.S. Congress passed three free trade agreements (FTAs), with South Korea, Panama and Colombia. The FTAs, notably that with Korea, could add more than $2 billion to the value of U.S. red meat exports over the next 15 years.
Estimates vary from $1 billion to $1.8 billion per year as to what the added annual beef trade to Korea might be once the FTA is fully implemented.
Any increase presents a conundrum for the U.S. beef industry. While everyone looks forward to an increase in exports to Korea and other markets, the result will be even less beef supplies at higher prices for Americans. One solution, albeit a longterm one, is that the FTAs will provide an incentive for cow/calf producers to expand their herds. But until it rains and rains in Texas and surrounding states, any expan sion is out of the question.
The lack of expansion and a booming hamburger business mean the U.S. market needs a lot more imported beef than USDA is forecasting for next year. About half of all Americans now eat a hamburger at least once a week, compared with 38 percent two years ago. Specialty hamburger chains are expanding rapidly. But where are they and other chains going to get their raw material from? Some chains use only fresh product. But the supply of domestic lean manufacturing beef is expected to tighten in 2012.
Cow slaughter is expected to be 0.8 million head lower than this year’s drought-inflated level.
Those who use frozen beef in their grind might find little relief on the import side. Total beef imports will decline this year for the third straight year to an expected 2.009 billion pounds, according to USDA forecasts. Imports will increase only to 2.09 billion pounds in 2012, it says. It will be fascinating to see which price points start to impact demand for the industry’s most valuable product. — Steve Kay (Steve Kay is Editor/Publisher of Cattle Buyers Weekly, 707/765-1725.)