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Agricultural News

Beef Demand Index Up Substantially Despite High Prices

Fri, 15 Aug 2014 13:05:56 CDT

Beef Demand Index Up Substantially Despite High Prices

Tight supplies of cattle in the US has give the industry high cattle prices, but also record high retail beef prices. Despite the higher cost the consumer appetite for US beef remains remarkably strong. Kansas State University Extension Livestock Market Economist Dr. Glynn Tonsor released his latest beef demand quarterly index. The latest report for April - June show the numbers would suggest that high prices have not kept consumers away from beef with the beef demand index up six to seven percent depending on the category.

"The all fresh beef demand, which is the broadest, was up six point seven percent compared to the second quarter of 2013," Tonsor said. "That is the largest year over year increase we have had since the end of 2004."

Radio Oklahoma Network Farm News Director Ron Hays featured Dr Tonsor on today's Beef Buzz. You can hear their full conversation by tapping on the LISTEN BAR below.

That year was in the midst of the Atkins diet craze that pushed more Americans to eat more protein. Tonsor said this time he doesn't think the Atkins diet or any other fad is driving the current demand strength.

"In general we know we have fewer pounds being offered to the consumer, that's because we are producing less," Tonsor said. "...but what's underneath that large year over year increase in demand...is that the price that the public has been willing to pay for those fewer pounds has exceeded most of our expectations."

This willingness to pay these higher prices has caught many off guard. Dr. Tonsor admits he was surprised by it as well.

"We know price is going to go up if demand is anywhere near stable and it has went up more than we anticipate," Tonsor said. "That's a very strong supportive story for the industry, because nobody is making anyone pay those higher prices."

Consumer are being asked to buy beef with fewer pounds available, but at the end of the day Tonsor said its market equilibrium working where people are voluntarily paying higher prices than we expected them to.

"They inherently are seeing more different value or their incomes or willingness to share those dollars is better than we anticipated," Tonsor said.

Beef supplies are going to remain tight through 2014 with maybe some turn around by 2016. Tonsor suggested the current demand trend bodes well for the future of the beef cattle sector.

"Ultimately that demand pull is what drives prosperity for the industry," Tonsor said. "Tight supply is important and I don't want to ignore that and that is a lot of what is going on today, but you can't just have tight supply without strong demand otherwise you will continue to have tight supply, we'll keep shrinking the industry right and we will benefit short term, but not long term."

"Long term there has to be more money entering the industry from a demand pull that consumers see value in that beef and at least for the second quarter of 2014 the numbers show that is going on and I remain optimistic going forward," Tonsor said.

The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.



Ron Hays Beef Buzzes with Dr. Glynn Tonsor
right-click to download mp3


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