Beef Market Affected by Confluence of Unusual Factors
Beef is one of those stalwart foods, a staple of the American diet and a centerpiece of the retail meat case.
While there has been some historic predictability about cycles of beef supply and demand, and fairly steady consumption trends over the past several years, the market for the king of animal proteins is bucking tradition lately.
Part of the disruption, of course, is linked to concurrent and high-profile challenges of supply chain issues, labor shortages, inflation and the pandemic. COVID-related shutdowns in cattle, feedlot and slaughterhouse operations in 2020 still reverberate in today’s market, given the unique lagging structure of the beef industry. At the same time, the labor crunch and bottlenecks in everything from fertilizer to feed to cattle tags are affecting the amount of available cattle.
This confluence of trends, along with other factors, has inevitably affected beef prices. As of November, the consumer price index (CPI) for beef was 20% higher than it was the previous year. For 2022, the Economic Research Services arm of the U.S Department of Agriculture (USDA) projects price inflation for beef to slow somewhat to a rate of 2%-3%.
Also in recent months, the beef industry has garnered national attention as the Biden administration castigated the industry’s top beef companies for their hold on the market. In revealing the federal government’s $1 billion support of independent livestock producers and meat processors, the president called out industry consolidation, asserting, “Capitalism without competition isn’t capitalism — it’s exploitation. That’s what we’re seeing in the meat and poultry industries now.”
The administration’s public comments and actions received a swift industry response. In a statement released in mid-January, the North American Meat Institute (NAMI) said: “The Biden administration has alleged that meat and poultry industry concentration is to blame for rising consumer prices. The truth is not so convenient.” Washington, D.C.-based NAMI used USDA data to show that although the four-firm concentration of fed cattle beef packaging has remained constant for more than two decades, the beef CPI has been variable over that same period.
Meanwhile, a number of independent and smaller beef suppliers and processors applauded the federal support of their efforts to stay afloat and competitive.
It’s What’s for Dinner — Still
In this operating environment, what does the beef market look like for grocers and their shoppers?
As 2022 gets underway, consumers are keenly aware of inflation trends. According to data from San Antonio-based market research firm 210 Analytics, beef, along with pork, produce and poultry, tops the list of categories in which most people notice inflation. The research firm also found that 45% of shoppers are looking for sales specials around the store more often.
Despite mounting price pressures, consumers are still drawn to the meat case. Overall meat sales were flat in 2021 compared with 2020 but still 17%-20% above pre-pandemic levels. Fresh beef slid 7.6% in volume sales last year, but remained 4.1% higher than in 2019. On a dollar sales basis, fresh beef was up 6.7% from December 2020 to December 2021, and 26.9% higher than in December 2019.
Other research shows that while inflation is real, so is interest in beef. Centennial, Colo.-based industry research group CattleFax reports that beef demand is the highest it’s been in 33 years. A recently released global animal protein outlook from international corporate and investment bank Rabobank predicts that demand for beef should remain solid and cattle prices should be stronger, even as processors grapple with ongoing issues.
With and Against the Grain
In a climate marked by inflation, COVID, regulations, and shifting consumer shopping and eating habits, there have been some accompanying changes in beef shopping.
Reacting to higher prices, many consumers are turning to value cuts. According to data from 210 Analytics, ground beef sales rang up $11.3 billion in 2021, continuing the upswing in ground beef purchases that began in 2020.
Beyond price, other factors are influencing beef product development and merchandising. Even before the pandemic, health, wellness and sustainability were driving consumer perceptions and purchases.
A recent report on sustainably raised meat from Chicago-based industry insights firm Midan Marketing revealed that more than a third (34%) of meat eaters have become more concerned about the sustainability of meat products they buy. The 2021 “Power of Meat” report from FMI — the Food Industry Association and the Meat Institute Foundation showed that 76% of shoppers feel that meat should be part of a healthy diet, up from 64% in 2020. At the same time, the number of flexitarians has grown and younger consumers are less inclined to say that meat belongs in a healthy, balanced diet than their Baby Boomer, Gen X and older Millennial counterparts.
As preferences shift, beef companies are responding. Last year, major processor JBS, based in Greeley, Colo., added a line of Right to Roam natural beef, with free-range, hormone-free and antibiotic-free beef offerings. Also, many traditional beef brands, including the largest processors and smaller regional and niche providers alike, are complementing their portfolios with plant-based products.
Other protein companies are starting to invest in cell-cultured meat, including beef. Springdale, Ark.-based Tyson Foods, for example, has backed lab-based meat firm Memphis Meats, while JBS is investing in a cultivated meat firm based in Spain. Even celebrities are getting into the act, like actor Leonardo DiCaprio, who recently invested in Aleph Farms and Mosa Meats as they pursue cultivated meats like cultivated hamburgers and steaks. For its part, Centennial, Colo.-based National Cattlemen’s Beef Association recently submitted comments to the USDA’s Food Safety and Inspection Service, noting that the term “beef” should be applied only to products derived from livestock raised by farmers and ranchers.
While big-picture issues like health, the environment and price shake up the category, taste and variety remain other key drivers of product innovation in beef. One example is a new line of Angus beef bacon from Pennsylvania-based Godshall’s, available at Sam’s Club locations. Meeting simultaneous demand for flavor, quality and organic profiles, Organic Prairie, a sister brand of LaFarge Wis.-based Organic Valley, has rolled out a new line of seasoned ground beef made with all-organic spices.
In addition, even as many shoppers shift to ground beef due to price concerns, there’s a segment of consumers seeking high-quality beef products as an indulgence. In 2021, Bentonville, Ark.-based Walmart debuted a high-quality line of Angus beef under the McClaren Farms label. Salt Lake City-based grill maker Traeger Grills responded to interest in higher-end beef by recently introducing a line of Traeger Provisions meal baskets that include cuts like Wagyu beef brisket, and one of Instacart’s partners is Boston-based ButcherBox, an online grocery platform that offers products like grass-fed, grass-finished beef portions.
