Tonsor discusses beef supply and consumer demandWritten by Saige Albert
“I’ll call to your memory the bacon shortage discussion that originated in the United Kingdom,” said Tonsor, noting that many U.S. news outlets aired the story. “I don’t think we had a bacon shortage, I think we had a shortage of cheap bacon.”
Because prices didn’t reflect what consumers were used to seeing, the term “shortage” was introduced. Tonsor noted that he doesn’t agree with the term shortage, which implies a zero quantity of meat available. Rather, he prefers to note that there are reduced volumes of meat available.
“I don’t think we have a shortage of meat,” he added. “I think we have a shortage of meat at prices that consumers are used to seeing – that is economics at work.”
While the cost of production has increased, systems have downsized, and the resulting costs are starting to show up on the retail shelves. Tonsor added, however, that because consumers are being asked to pay more, they are expecting more as a result.
“They will ask for more in return in terms of meat quality,” said Tonsor, adding that the issue of production technology will become more of an issue.
“The discussion on various technologies that the food industry uses are going to intensify with customers and the consumer,” Tonsor explained. “At the heart of that is the economics of trying to feed a growing population and trying to mitigate increasing food prices.”
Additionally, adopting technologies in a manner that is acceptable to the public will become more important.
“Acceptable is in the eye of the beholder, and that contention will be ramped up in the next couple of years as the world adjusts to less meat, high prices and more people seeking additional protein,” Tonsor said. “I think we are going to be more and more debates.”
While technology offers lots of positive attributes to the beef industry, Tonsor said, “Don’t be surprised if there is more questioning of that technology as we go forward in the story.”
Currently, however, demand remains even to strong. For the third quarter of 2012, looking at all fresh beef prices, Tonsor said that demand increased, although per capita consumption went down.
“We can have a demand increase even if consumption declines,” he explained. “The numbers are a function of the prices and quantity series that we use.”
For all fresh beef, prices increased by 3.3 percent for the quarter, resulting in a demand increase of 1.9 percent. However, when the quantity is narrowed to only look at choice beef, Tonsor showed a 0.8 percent decline in demand.
“The question is, what price will be transacted?” Tonsor posed. “How much quality does the consumer see, and how high will prices go?”