Consumer confidence and demand could signal positive growth for beef industry

In the short week between Christmas and New Year’s, retailers looked to replenish their empty meat cases after holiday sales, said the Daily Livestock Report (DLR) on Jan. 2. 

“Gone are the rib roasts, turkeys and hams, and we should see improved demand for beef end cuts, ground beef, pork loins and pork picnics/butts,” DLR continued. “Beef and pork retail feature activity was not as strong as in previous years at the end of 2017, and retail features are normally not that great at the start of the year.”

An additional complicating factor in the picture is the extreme cold weather that much of the country experienced at the turn of the year. 

“It is uncertain at this time how the extreme cold impacting some of the country will affect consumer eating patterns,” DLR said. “Anecdotal evidence would suggest that retail business should receive a boost, but this will be offset by weaker sales at foodservice.” 

At the same time, a Jan. 3 report from DLR noted consumer confidence in the U.S. continued to trend higher during the last six years. 

“Consumer confidence is closely correlated with economic growth, and relatively strong numbers bode well for red meat demand,” DLR  said, noting that simultaneous economic growth and consumer confidence were key to the red meat industry in 2017. 

Worldwide consumer confidence for 2018 is also likely to remain over the normalized 100 index value, including confidence in the U.S. China’s consumer confidence is expected to be robust, as well, but 2017’s strong upward trajectory is not expected into the new year.

Consumer demand also held up in 2017.

Currently, supplies of beef available to the U.S. consumer are projected to be up to 56.8 pounds per person, which is an increase from 54.3 pounds on a retail weight adjusted basis. 

“The stoic performance of beef demand comes as retail sales in the food sector grew at the slowest pace since The Great Recession of 2008-09,” reported DLR on Jan. 4. “Grocery store sales in November were up 3.4 percent from a year earlier, but the year will probably be no better than up 1.5 percent because of anemic growth in the first two months of the year and in June and July.”

Trends in food service are cause for additional concern, DLR said, noting that sales growth in November was only up 2.5 percent from a year ago, following 1.5 percent growth in October. 

“For 2017, food services and drinking place sales growth is on a path to be up only 2.3 percent from last year, which compares with an eight percent gain from 2015 and six percent increase in 2016,” DLR continued.

Retail trade and food service sales across the economy increased 6.4 percent from a year prior in November, which was the best year-over-year gain for any month in 2017. 

“Consumer spending has been rock-solid during the past year relative to the forces that are usually assumed to drive consumer behavior,” DLR added.

Wage and salary growth and improved disposable income levels are encouraging for the meat industry, as the trend could translate into favorable retail sales tendencies.

“Food sector sales as a percent of the total retail trade have been declining throughout this year, with the downtrend accelerating during the last quarter of the year,” DLR concluded. “In light of this trend, the performance of beef demand was impressive.”

Saige Albert, managing editor of the Wyoming Livestock Roundup, compiled this article from several reports issued by the Daily Livestock Report. Send comments on this article to saige@wylr.net.