Beef Demand Contributes to Producer Success
Driving demand for beef is at the core of the Beef Checkoff. Why? Because consumer beef demand drives producer success.
The beef industry is very complex, with many layers and sectors that must work together. Multiple factors affect the ultimate price a producer gets for their cattle at market. One particularly significant factor is beef demand.
Demand is the amount of a good or service consumers are willing and able to purchase at each price. Demand is based on several factors: income, price, quality, advertising, taste preferences and confidence in that product. Ultimately, beef demand relies heavily on sentiment, trust and loyalty. The total value consumers place on beef products affects beef carcass values, as well as prices for fed cattle, feeder cattle and calves.
In the 1980s and 1990s, when beef demand plummeted, producers were severely struggling and realized that something needed to be done to save the industry. In 1988, 79 percent of producers voted in a mandatory Checkoff assessment to salvage beef demand through a national referendum vote. To this day, the Beef Checkoff actively works to stimulate beef sales and consumption through a combination of initiatives; all of these initiatives work to maintain beef as a superior protein of choice.
Defining “Demand” and How it Affects the Producer
Producers can agree that demand is important, but many have questions about exactly what demand is and what it means to them. To answer these questions, the Cattlemen’s Beef Board talked with Dr. Derrell Peel, an Oklahoma State University extension livestock marketing specialist, to walk through what demand is and the important role it plays for cattle producers.
What is Beef Demand? And What Factors Determine Beef Demand?
“Demand is the willingness and ability of a consumer to purchase certain quantities at certain prices. When we evaluate demand, we first look at the price of the product and the prices of related products that might influence how a consumer would make decisions between two products; then, we look at income levels and other things that determine the consumer’s overall disposable income.”
How Does Beef Demand Differ From Beef Consumption?
“Demand and consumption commonly get confused. Beef consumption is just the quantity part, how much consumers are purchasing and eating.”
What Factors Determine What Price a Producer Gets Per Head of Cattle at Market?
“All value in the beef industry comes from consumer demand for beef products. In general, the value of cattle at various levels is derived from the value that consumers place on the resulting set of beef products.”
What Caused The Bottleneck Market During COVID-19?
“The biggest stage of the marketing margin happens when we go from fed cattle to the packing plant. There’s all of that fabrication into those beef products. There’s a tremendous amount of shipping, labor and other things involved. During the coronavirus situation, we basically created a much a larger increase in costs at that marketing margin level.”
What Are the Effects of Restaurant vs Consumer Home Demand?
“It’s important to recognize that beef is not one thing; the beef industry ultimately produces thousands of different products, and the demand for each of those products is separate. You can see the coronavirus’s impact at wholesale prices. Some of the most expensive beef products and some of our middle meat steak-type products actually decreased in value. At the same time, we had increased demand for other products in the grocery store. The bottom line is, yes, it did have a big impact on cattle’s overall value.”
How Does Increase Beef Demand Benefit Producers Over the Long Haul?
“All of the value in the industry starts at the consumer product demand level. Consumers who have a preference for our products, who value it and who are willing to spend part of their disposable income on it collectively – that demand then works its way back through this enormous set of markets that we can then see at the producer level.”
The Beef Checkoff program was established as part of the 1985 Farm Bill. The checkoff assesses $1 per head on the sale of live domestic and imported cattle, in addition to a comparable assessment on imported beef and beef products. States may retain up to 50 cents on the dollar and forward the other 50 cents per head to the Cattlemen’s Beef Promotion and Research Board, which administers the national checkoff program, subject to USDA approval.