September 21, 2006

 

Domestic demand for beef declining in the US

 

 

Domestic demand, the bedrock of the US cattle producer market when countries banned US beef, is being eroded away after years of growth as export markets return, according to Cattle Network.

 

A number of factors affect demand, such as disposable income, competing meat products, or dietary preferences influenced by health. To measure shifts in the entire demand curve, the beef demand index was developed a decade ago.

 

To calculate the beef demand index, a base year is chosen. 

 

The current year's inflation and supply adjusted retail Choice beef price is divided by the base year's inflation adjusted price and the result is multiplied by 100 to obtain the beef demand index value for the current year.  Although any base year can be chosen, 1980 is generally used since that was about the approximate start of the long-term decline in beef demand.

 

The beef demand index calculations shows a steadily declining demand for beef.

 

After strengthening sharply during 2004, demand for Choice retail beef showed signs of softening during the first half of 2005. During the last half of 2005, however, beef demand weakened considerably.

 

Compared to a year earlier, beef demand index values declined close to 7 percent, respectively, during the second half of 2005.  The downtrend continued during the first half of 2006. 

 

The first quarter 2006 beef demand index value was 5 percent below the first quarter of 2005 and the second quarter 2006 index value fell 10 percent below a year earlier.

 

The higher interest in low carbohydrate diets in the late 1990s may have caused a surge in beef demand in recent years as people switched to protein.

 

However, as interest in such a diet waned, beef began to fall out of favour. High energy prices currently has also reduced consumers' spending on beef, thus dampening demand.