Rabobank’s senior beef analyst, Lance Zimmerman, talked in depth with Oklahoma Farm Report’s Ron Hays about consumers and their attitudes towards beef. Overall, he says that the consumer is “hanging in there” despite current financial stressors and concerns about the future.
“When we look at the consumer, I always like to remind producers that demand has two elements to it. One, is what their expectation is for the future,” Zimmerman explained. “What we’ve seen play out over the last eighteen months – even as we’ve seen heightened geopolitical risks, sky-high inflation, and challenges with interest rates – is when you look at the consumer sentiment data, they show that the consumer said, ‘Our situation is okay today. It’s not great. It’s not dire. It’s just okay.”
He went on to say how the consumer’s concerns for the future have been the “looming cloud” over demand discussion for some time. The consumer is keeping their personal finances in order proving they are stressd, but he consumer seems to realize that although they are worried, they aren’t helplessly sinking, so in essence, they are treading water.
“I think that is why beef demand has been so good,” Zimmerman added. “Consumers told us time and time again, as long as their income situation doesn’t change, even if beef prices keep going up, they are going to continue buying beef.”
Retailers are helping to keep the margins between pork and poultry and beef on a narrower spread because although pork and poultry prices have come down considerably, their retail prices haven’t. While the competitive price margin is still there, consumers seem to think that premium beef prices are still worth it.
“When the consumer is looking at restaurant prices that keep ratcheting higher, because restaurants can’t hide higher labor prices in their menu items to near the extent that retail can in the meat case, the consumer transitions from buying beef products at restaurants, and instead, buys at retail,” Zimmerman explained. “We are getting a lot of competition at the retail level this grilling season to maintain foot traffic of those consumers and put beef in feature ads. That is good news for the beef producer today.”
Cyclically, the U.S. consumer hands more of their dollars all the way back to the cow/calf producer. Those dollars transition from the packer, to the feedyard, to the stocker background, or ultimately to the cow/calf man. That transition was seen this past winter.
“Costs are still pretty high for a lot of producers, but they are getting more reasonable. Grain stocks are ample. We are in a period of time right now, where I think producers can have confidence that good margins are ahead of them,” Zimmerman added. “We don’t have an abundance of pond water and stream water across a lot of major cow/calf country, but pastures have been green so far. If Mother Nature will help us out, there’s going to be a real opportunity to rebuild the cow herd over the next several years.”
Zimmerman noted that the consumer still loves the product being produced, and while there is still a little concern about recession risks, it is becoming less as time goes on. He projects that beef prices will keep getting higher and the cattle market will continue to be very strong into the fourth quarter of this year. He is hopeful that in 2025, increased heifer retention will provide the next leg of support for the beef market.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
