Wednesday, July 6, 2022

Gut feeling

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Americans regard their right to consume red meat as one almost as sacred as the right to bear arms. Yet recent trends in US consumer eating habits suggest gristle is coming off shopping lists before guns. Industry concerns over consumption were raised following the release early last year of a US Department of Agriculture (USDA) report on per capita beef supply in the US. The report indicated a significant and ongoing slide in beef production and supply.

The decline is estimated at 12% over five years in the land of giant burgers and massive ribs. Several reasons have been related by news media to explain the drop as linked to a slide in demand, rather than issues of supply itself.

The ensuing debate over the reasons for the decline has the National Cattleman’s Beef Association (NCBA) pitching supply and availability issues against groups hailing the decline as indicative of growing recognition among consumers of the need to lower red meat consumption.

Typically US beef consumption is high by world standards. In 2012 it averaged 24kg a head, down from 28kg in 2007 and making it around equal to New Zealand’s a head consumption of about 25kg a head. Total meat consumption has the US in the top three nations, at around 72kg a head a year.

An analysis of the data by the National Cattleman’s Beef Association (NCBA) tends to put a more tempered view on the precipitous decline. It maintains drought conditions have reduced the national herd size, while an increase in exports and a decline in available imported beef have had greatest effect on the availability and therefore price of beef in the US.

Drought conditions, particularly in the main cattle growing areas including Texas, have pushed cattle numbers down again, with significant areas of grazing land being eliminated and feed costs surging, challenging feedlot profitability.

US herd numbers are now at their lowest point in 61 years, since the worst drought in the 1930s, and invariably tightening supply. This has been reflected in prices, with cattle futures surging at the start of the year to US$1.35 a pound.

The NCBA report and analysis maintains the per capita beef supply is only one indicator on which to base sliding demand claims, and full analysis requires a closer look at the prices being received by producers.

Over the time of the recent decline, US beef production has remained relatively flat, and population numbers have increased on average almost 1% a year to 314 million.

With stable production, and growing population, simple maths indicates less meat available a person. On top of this, the supply was shortened further by the increase in beef exports, and reduced imports, with exports outstripping imports by 1.1 million kilograms in the past year.

This has been prompted in part by the lower US dollar making the product more appealing to countries that previously may have exported beef to the US.

The main markets for export are predominately Japan, Korea since a free trade agreement was signed, and to a lesser extend Taiwan.

An easing of Japan’s post-BSE regulations has enabled greater exports there. Beef + Lamb NZ general manager for market development Craig Finch says this presents some of the greatest competition to NZ marketers, and there is no indication the US will be turning out of these markets while its own economy remains recessionary.

The NCBA expect supply to continue tightening through 2013, with ranchers expected to hold on to stock to rebuild capital numbers following the big cuts through the recent drought.

The association also acknowledges it is going to take several years for the domestic supply of beef to turn around.

The industry voice, Daily Livestock Report, published by the Chicago Mercantile Exchange (CME), has also attributed the decline to increased cost pressures on feed supply, due to corn for ethanol policies reducing feed supply, and the drought.

It also points at the “efforts of non-government organisations opposing meat consumption for reasons ranging from environmental to animal rights to social justice” to lowering demand.

The shortening on supply has reflected in consumer prices, with increases of around 7% in the past year. The NCBA maintains this increase is greater than what would be expected with a supply that was down 4% on the year before, and that demand is therefore strong enough to pull prices up further.

The NCBA does acknowledge some shift in consumer consumption patterns through the recession, but maintains the “underlying desire” for beef remains strong.

It backs up its positive price data with a tracking study done late in 2011 which found an increase to 77% from 71% of consumers who found the positives of beef outweighed the negatives.

Further work indicated a significant turnaround in consumers’ plans to eat more beef. Back in 2001 three times as many consumers had plans to reduce beef consumption as to increase it, but today more intend to increase rather than reduce consumption.

Still, the downwards shift in beef consumption has been matched by lower per capita consumption of chicken and pork.

Pork, which has been stable since the 1980s, has dropped from about 22kg a head to 18kg since 2007. Chicken peaked in 2007 at an average consumption equal to beef of 28kg a head, and has also dropped, to 25kg a head.

Perhaps inevitably various interest groups are claiming success with the figures, with Americans consuming 65% of their protein input through animal sources as opposed to the global average of just 35%.

An advertising awareness researcher has picked the rise of “flexitarianism”, lowering meat intake without actually becoming a vegetarian, as one of the key consumer movements in the past year.

NZ sales 

Craig Finch of Beef + Lamb NZ said continuing strong demand for NZ grass-fed manufacturing beef in the US suggested supply issues rather than any significant downward shift in demand were underlying the market’s dynamics.

Two-thirds of NZ’s sales into the US were as manufacturing beef. Meantime there was some recessionary pressure being felt on higher value prime cuts.

“There has been a shift in consumption patterns, the prime cut market has come off, and there are still quite high inventory levels there; in fact we have heard a portion of it has had to go for grinding beef.”

He expected similar levels of exports to the US over the coming year, with short-term prices slightly depressed by the volume of stock coming up for processing here due to the drought’s effects.

“But returns from the US are still very good on a historical basis; however we have a dollar at US84c, compared to US80-81c last year.”

NZ’s quota to the US was 213,000t, a figure he expected would be met again this season.

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