beef demand... it's been a very good year

December 13, 2018

In 2018, retail beef demand has been strong!  While that sounds good, what exactly does it mean?  Is it because consumption has continued to increase since the tight supplies of 2015?  Consumption has indeed been increasing, but this is only half the story…the other half is price.

Price adds perspective and takes us from consumption to demand.  Said another way, understanding consumers’ willingness to pay for the available supply of beef empowers us to go from merely noting consumption to measuring demand.  Then, we use demand indices to compare demand across time and products.1  An index tells us how much more (or less) consumers are paying than would have been expected if demand were flat.  And, as the latest Beef Demand Index shows, 2018 retail beef demand is 15% higher than in January 2012 (Chart 1), so beef demand is indeed strong.2

Source: Tonsor, Schroeder, Creating and Assessing Candidate Food Service and Retail Beef Demand Indices, January 2017.  IRI/Freshlook, Total US MULO ending 10/26/18; Categorized by VMMeat System.

Plugging monthly retail sales data into the index enables us to see distinct seasonal trends.3 For example, total beef demand is typically weakest in November (due to Thanksgiving) and strongest through the summer grilling season and the December holidays.  Further, we can see that 2018 demand has been particularly robust as index values have averaged 6% higher year-to-date than for January-October of 2017.  No doubt a strong economy helps, but consumers have been avidly enjoying all the available beef at a fairly robust price.  In other words, beef is worth it for shoppers, and strong retail sales are the result.

Diving deeper into the sales data, we can break out demand by category/primal (Chart 2).4 Here, you can see that stronger overall beef demand is being driven by the Loin and Ground Beef, whereas Chuck demand has been steady and Round demand weaker.  Further, the importance of the summer grilling season is very pronounced whereas end-cut demand improves in the fall through winter months (think pressure cookers, slow cookers or the Short Ribs I’ll braise in my oven this weekend).  Ground Beef demand remains relatively steady throughout the year given its flexible staple role.  The opposing seasonality of whole-muscle cuts and constant presence of Ground Beef show how beef can help drive total store sales throughout the year.5

Source: Tonsor, Schroeder, Creating and Assessing Candidate Food Service and Retail Beef Demand Indices, January 2017.  IRI/Freshlook, Total US MULO ending 10/26/18; Categorized by VMMeat System.

Another way to look at beef demand is by quality grade.  If there were any doubt, the data confirms consumers are loving the higher quality beef supply that has been coming to market.  Chart 3 shows strong increases in consumer demand for USDA Choice quality grade whereas Select demand has withered.  Branded programs have helped drive this quality awareness and experience amongst consumers, although demand for all Choice beef is robust.6

Source: Tonsor, Schroeder, Creating and Assessing Candidate Food Service and Retail Beef Demand Indices, January 2017.  IRI/Freshlook, Total US MULO ending 10/26/18; Categorized by VMMeat System.

The good news for this quality demand story is the share of Prime and Choice beef production has grown (Chart 4).7 Farmers and ranchers continue to improve genetics and other herd management practices to produce more of the higher quality beef consumers are demanding. The resilient Choice-Select spread – despite increasing volumes – further confirms this strong demand for higher quality beef.

Overall, retail beef demand is strong.  Despite other lower priced proteins, consumers have remained willing to pay robust retail prices for the increasing supplies of higher quality beef.  While volumes may vary somewhat throughout the year, consumer willingness to pay for beef has clear peaks as well as overall trends.  And at the end of the day, it’s pretty much always the season for beef.

  1. Tonsor, Schroeder, Creating and Assessing Candidate Foodservice and Retail Beef Demand Indices, January 2017. 
  2. IRI/Freshlook retail sales data is available with 5-6 years of history, hence, the January 2012 starting date for these indices.
  3. IRI/Freshlook, Total US MULO ending 10/26/18; Categorized by VMMeat System.
  4. The rib is absent because demand index statistics don’t “work” for this primal.  The dual seasonality of the ribeye, summer grilling and December holiday sales, creates this issue.
  5. IRI Market Basket Study, 2014.
  6. IRI/Freshlook, Total US MULO ending 10/26/18; Categorized by VMMeat System.
  7. USDA Agricultural Marketing Service, 2018