Beef Demand Increase Signals Stability

January 27, 2000

Beef demand in 1999 increased 3.5% over 1998, indicating that for the first time in 20 years, demand has stabilized. Industry officials say that demand is accompanied by increased consumer spending for beef and higher per capita consumption.

The food service sector has been an important part of the beef demand increase. "Beef remains a dominant force in food service," said Ronald N. Paul, president of Technomic, Inc., a Chicago-based marketing and management consulting firm specializing in the food service area. "We have seen growth in beef servings from steaks to roast beef sandwiches to the all-

American burger."

In 1998, consumers spent 51% of their food dollar on meals away from home and 49% in the retail market, according to Technomic research. "More consumers turn to restaurants as a convenient meal solution, and beef offers both an option people like and can find," said Paul.

The information was made public during the 2000 cattle industry annual convention and trade show in Phoenix, AZ.

Consumer spending on beef, retail and food service, totaled $49.22 billion last year, a $2.58 billion, or 5.5% increase compared with 1998. Per capita spending increased 4.5% to $180.37, a $7.82 per capita gain.

Also of significance, consumers are buying beef at steady to slightly higher prices despite record-large supplies. USDA average retail beef prices increased 7.2 cents per pound from a year earlier, according to Cattle-Fax data. At the same time, the beef supply for the year reached 26.39 billion pounds, 2.8% more than 1998.

"Increased supply usually drives consumer prices lower, as demand becomes saturated," said Randy Blach, Cattle-Fax market analyst. "In 1999, the exact opposite happened."

Beef’s share of total meat expenditures also appears stable compared to 1998 despite strong competition from pork and poultry. Beef’s share of consumer spending dollars in 1999 was 40%, slightly higher than the 1998 average. Pork, chicken and turkey market shares in 1999 were 28.4%, 27.4% and 4.2% respectively. Blach expects beef to hold that market share through 2000.

Preliminary figures show the value of U.S. beef exports in the first 11 months of 1999 increased 13% to Korea and 14% to Mexico. These countries, along with Japan, continue to increase imports of U.S. beef as their economies recover from recent financial crises.