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Several economic factors seem to indicate beef demand may be stabilizing for the first time in more than 20 years, say beef industry experts. Preliminary beef demand data for the first three quarters of 1999 were released at the Beef Summit 1999, a one-day seminar held in New York for beef marketers including retailers, food manufacturers and foodservice operators. According to industry analysts, beef demand increased 4.59 percent during the third quarter of 1999, compared to demand during the same period last year. While seasonal demand slipped 1.65 percent between the second and third quarters of 1999, industry leaders remain optimistic that beef demand is improving. The rate of decline of beef demand has been slowing since 1996, according to the Beef Demand  Index, which is calculated by leading independent economics and industry experts using USDA per capita beef consumption data and USDA Choice retail beef prices adjusted for inflation.Randy Blach, market analyst for Cattle-Fax, a private market research firm in Denver, Colo., told Beef Summit attendees at least two of the key factors contributing to demand gains in 1999 to date include consumer spending for beef and gains in per capita consumption. Consumer spending on beef from January through September 1999 totaled $36.7 billion - a $1.5 billion (or 4 percent) increase compared to one year ago. Consumer beef spending for the entire year is projected to reach $48.56 billion, which is nearly $2 billion above the 1998 level. And, per capita spending on beef is expected to grow to $178 by the end of 1999. This level of spending represents a $5 per capita gain and the largest increase in per capita spending since 1990. A key factor in the spike for total beef spending is the fact that consumers are buying beef at steady to slightly higher prices despite record-high beef supplies. USDA average retail prices are up 4 cents per pound from one year ago, according to Cattle-Fax data. At the same time, the beef supply for the year is expected to reach nearly 27 billion pounds -- 2.5 percent above the 1998 levels. "Increased supply usually drives consumer prices lower, as demand becomes saturated. So far this year, the exact opposite has happened," Blach said. In addition to increased consumer spending, per capita beef consumption from January through September 1999 is up 0.9 pounds from one year ago.  Cattle-Fax estimates year-end per capita consumption will jump to 69.2 pounds per person--a 1.6 percent increase from 1998 levels.Improved exports during the first half of 1999 have contributed to the current state of beef demand. Japan and Korea have begun to increase imports of U.S. beef as their respective economies begin to recover from recent financial crises, and Mexico is expected to remain a strong import customer. Other factors that have helped beef demand include a strong U.S. economy, rising wages, lower inflation and a low unemployment rate. Yet Chuck Schroeder, CEO of the National Cattlemen's Beef Association (NCBA), said while preliminary demand figures give beef producers a lot to be hopeful for, the battle is far from over. "We have made great strides toward improving consumer demand for beef, and we need to continue building on those successes if we are to keep demand on the upswing for America's beef producers," Schroeder said. As the major checkoff contractor to the Beef Board, NCBA embarked on the first leg of a long term strategy in late 1998 to stabilize beef demand by focusing efforts on making beef more convenient for today's time-starved consumers. Schroeder says these initiatives also have contributed to first and second quarter demand gains. With checkoff funding, NCBA helped introduce a new category of convenient, branded beef items that can be heated in the microwave and be ready to serve in about 10 minutes. Several manufacturers  of these products have seen double digit sales and distribution increases since the beef industry launched its 1999 national marketing campaign to build consumer awareness and trial of these microwaveable beef products.While primarily found in the supermarket fresh meat case, heat and serve beef products are also making their way into restaurants to ease operational issues and deliver a great beef meal for consumers. Foodservice operators are looking for convenient, labor saving products. These value-added beef entrees provide operators with convenient, consistent and versatile high quality beef menu solutions that help address their labor problems. The beef industry's new product development initiative introduced more than 30 new products in 1999 using currently undervalued beef cuts from the chuck and round. New products such as a rotisserie beef roast for the deli, beef appetizers for restaurants and pre-marinated steaks are making chuck and round products more convenient and appealing for consumers -- and more profitable for the industry. |
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