An increase in commodity prices typically discourages consumers from buying that product.
American data indicates beef demand has increased despite higher prices over the last year, which suggests the market for beef has changed. Perhaps it’s no longer a commodity.
“Most of us thought when we hit these record high beef prices … that we would see demand drop,” said Darrell Busby, a livestock specialist with the Tri-County Carcass Futurity Co-operative, which represents Iowa producers who retain ownership of cattle until slaughter.
”Well, demand did (drop) for ground beef, a lot of people switched to pork, but when you look at the demand for prime steaks and CAB (Certified Angus Beef) steaks, people were still willing to pay the high prices at the restaurants.”
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CME data from the United States, which was released earlier this month, showed that retail fresh beef demand in the third quarter of 2015 was higher than the same period last year.
Beef sales increased even though prices were six percent higher than the third financial quarter of 2014.
“The bottom line is consumers are still demanding more beef at increased price levels,” said cattlesite.com.
Larry Corah, vice- president of Certified Angus Beef, which is a branding program from Ohio, said the sales data demonstrates that the market for commodity, or generic beef, is slowly dying.
“The statement that we’ve moved past a commodity industry is very much a correct statement,” he said.
“I totally agree with (it), and I don’t see us going back.”
Corah said beef is now sold as a branded product because brands are powerful marketing tools.
Researchers at Kansas State University conducted a study in which subjects sampled beef and rated the quality of the product.
Groups that were told they were eating a particular brand of beef, such as CAB, rated it higher than groups who were not shown the brand name.
Corah said grocers and restaurants understand the influence of brands and market beef accordingly.
It’s more effective to say corn-fed steaks, or CAB strip steaks, are on sale than telling customers that generic strip steaks are on sale, he added.
“Beef brands are, for the most part, (related) to quality,” Corah said. “That lets the consuming public identify a certain type of eating experience and gravitate to that brand.”
Mark McCully, another CAB vice-president, said other data supports the argument that consumers are willing to pay a premium for high quality beef.
Sales of high quality boxed beef in the United States have surpassed the amount of Select beef, a lower quality grade, in the last few months.
“Over the past 10 years, those lines have been on a path to intersect…. It’s just finally happened,” McCully said.
“Which, to me, speaks to a changing beef marketplace.”
McCully said the younger generation, usually described as millennials, is willing to pay more for quality.
In other words, today’s consumers no longer want generic ground beef or steak. They want to buy food with provenance, a story or certain attributes.
Bill Buckner, senior vice-president with Cargill, agreed that the beef marketplace has become highly segmented. Nonetheless, he’s not convinced that commodity beef is dead.
“I wouldn’t use those words, disappearing or dying,” he said.
“There are those consumers, the Gen Ys and Gen Xs, they do want food with a story … (but) I still believe there’s a group of consumers (where) price is most important…. If you want to call it commodity, I think there’s always going to be that segment.”
robert.arnason@producer.com
