More competition, economy pressure beef industry

by Staff
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NEW YORK — Cow and calf producers in the United States are facing increased competition and costs coupled with a stagnant economy — factors that might change consumer preference — according to Rabobank in its February "Beef Ag Focus."

"Historically a prolonged period of profitability would be sufficient to encourage an expansion in production — the phrase ‘nothing cures high prices like high prices’ may have been coined with the beef industry in mind, but has not necessarily held true over recent years," said Fiona Boal, executive director of Rabobank’s Food and Agribusiness Research and Advisory department. "Instead, it would appear that significant changes in the cow herd are a trend of the past, not the future."

Rabobank said high feed costs, competition for land and weather issues have helped keep cow supply steady over the years, but an increase in disposable incomes and changing diets has created a strong demand for meat, keeping prices and profitability high. Yet as the U.S. economy faces a downturn, some products will suffer as consumers seek alternative products that are less expensive.

"Forecasts of a weaker economy and continued high energy prices are not good news for beef, the most price-elastic of the major meats," Ms. Boal said. "Consumers in the U.S. are known to trade down when it comes to their beef purchased before reducing the amount of beef consumed. This means that there will be more pressure on primal cuts, especially at the retail level where the retailers have the ability to react quickly to consumer preference by shifting the focus of their featuring activity."

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