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CME: Increase in 2019 Retail All-fresh Beef Demand Index

19 February 2020

US - The Livestock Marketing Information Center (LMIC) calculates demand indexes for beef and pork, writes Steiner Consulting Group, DLR Division, Inc.

The demand index is driven by two primary factors, per capita retail beef (pork) consumption and retail beef (pork) prices. It is worth noting that per capita consumption is not demand, rather it is a measure of product availability.

Recall demand is the consumer’s willingness to purchase a good at a given price depending on their tastes and preferences. Prices used in the demand index are deflated using the consumer price index (CPI) with 2000 as the base year. As expected, final calculations for 2019 demand indexes showed strong increases for both beef and pork.

The retail all fresh beef demand index value of 109.02 for 2019 was a 2.3 percent increase from last year and the highest level since 2015 (111.59). Per capita retail beef consumption grew 1.3 percent in 2019 to 57.95 pounds per person continuing the trend which started in 2014.

The most recent high in per capita consumption of retail all fresh beef was 2010 at 59.58. While beef consumption grew so did prices. Retail beef prices were $581.94 cents per pound in 2019, also increasing 2.3 percent from 2018 in nominal terms.

In real terms (CPI deflated) retail all fresh beef prices increased 0.6 percent in 2019. In 2020, beef supplies are expected to tighten on lower available cattle supplies which may push cattle prices higher, possibly impacting retail prices and perhaps shrinking the demand index.

The pork demand index was 107.44, a sizeable increase of 10.1 percent over 2018. Much of the increase in the demand index is due to per capita consumption which increased 2.6 percent, over the prior year, to 52.27 pounds per person, the highest level in two decades.

In 2019, commercial pork production increased 5.0 percent to 27.6 billion pounds; this indicates that there was more pork available for consumers. The 2019 retail pork price was $384.33 cents per pound (nominal), a 2.6 percent increase over 2018.

In real terms, pork prices increased 0.9 percent. If pork remains competitively priced coupled with an LMIC forecasted 3.8 percent increase in pork production, the pork demand index could see further improvements in 2020.

Increases in the demand index for both retail all fresh beef and pork were good indications that demand was strong in 2019. This was a positive sign given production increased for both meats. LMIC is forecasting production to increase again in 2020 for total read meat and poultry.

Also noteworthy is per capita disposable income increased just under 4.0 percent in 2019, assuming this trend continues into 2020, this would lend support for continued strength in beef and pork demand this year.


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