U.S. beef demand and retail beef prices reached record-high levels in 2020, fueled by several aspects of the COVID-19 pandemic. But there are vulnerabilities in the post-pandemic recover period, analysts say.
Supplemental income, reallocation of spending and shifting consumer behavior have a meaningful impact on beef demand, and all those things played a role during the pandemic, Rabobank analysts said in their report “U.S. Beef Demand: The Risk of Recovery.”
The federal government supplemented incomes through stimulus bills, consumers reallocated spending from pre-pandemic expenditures such as travel and restaurant dining and consumers stockpiled groceries for in-home consumption.
As the economy starts to reopen this year, consumers’ earned income recovery and foodservice revival will be critical to beef demand, the analysts said.
“If meaningful government stimulus expires before the economy fully recovers, which seems highly likely, per-capital personal income will likely fall below both pandemic and pre-pandemic levels,” they said.
Final recovery, or lack thereof, in specific household income categories will be more important. Beef demand is more sensitive to middle-income changes than other categories.
“The basic needs, such as food, of the highest income households are likely of little to no concern. … For the lowest income category, ground beef is still an affordable protein choice. However, middle meats (higher value cuts) consumption may be limited,” they said.
The revival of full-service restaurants, as well as hotels and institutions such as schools, is another piece in the demand picture.
As of early December, the National Restaurant Association estimated 110,000 U.S. restaurants, 17%, had closed permanently since the start of the pandemic.
Restaurant woes haven’t had the detrimental impact on beef demand that was originally feared, given time available for at-home cooking, but that might change as consumers resume their hectic pre-pandemic schedule, the analysts said.
In the wake of the last recession, December 2007 to June 2009, U.S. foodservice sales were flat or declining for nearly two years.
“Given the damage to full-service dining during the pandemic and the ongoing risk to consumer wallets, it will likely be late 2022 or 2023 before full-service restaurant sales return to pre-pandemic levels. If the full-service restaurant industry doesn’t recover at the same pace as our daily lives, beef demand, particularly for middle meats, could be at risk,” the analysts said.
“There has traditionally been a stickiness to beef demand, so it seems unlikely that beef demand will completely deteriorate in the face of the potential challenges ahead,” Dustin Aherin, Rabobank animal protein analyst, said.
“That said, beef demand will likely fall from its current record highs,” he said.
Eventually, the extreme changes to daily life and income sources will more closely align to pre-pandemic norms, even if some trends remain.
“Consumers have shown that if they have the income, time and access to beef, beef demand will be strong,” the analysts said.
But the beef industry must not become complacent. It should work to ensure that beef fits into consumers’ post pandemic diets. It should also focus on consumers’ lifestyles and preferences, such as e-commerce, delivery, cooking education, production practice or other marketing strategies, they said.
March 14, 2021 at 06:09AM
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Beef demand likely to fall post-pandemic, analysts say - Capital Press
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