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CME: 2017 Consumer Demand for Beef Holds up Well

04 January 2018

US - Consumer demand for beef held up well in 2017, considering slow growth in the economy, intensifying competition from more supplies of competing meats and the developments in consumer tastes and preferences for new food products or dietary diversity, reports Steiner Consulting Group, DLR Division, Inc.

Through the first eleven months of 2017, the retail price of choice beef declined by 1 per cent from a year earlier, according to USDA-ERS (Economic Research Service). With general price inflation in the economy running at 2 per cent, this translates into a 3 per cent decline in prices in inflation adjusted terms.

Supplies of beef available to the US consumer in 2017 are projected to be up to 56.8 pounds per person from 54.3 pounds on a retail weight adjusted basis, with only December production and import-export data for November and December yet to be officially released. The graph below shows how the price-quantity data for 2017 compares to the last 27 years.

The stoic performance of beef demand comes as retail sales in the food sector grew at the slowest pace since The Great Recession of 2008-2009. Grocery store sales in November were up 3.4 per cent from a year earlier, but for the year will probably be no better than up 1.5 per cent because of anemic growth in the first two months of the year and in June and July.

The story for food services and drinking place retail sales growth trends is even more alarming. November sales growth for this sector was only up 2.5 per cent from a year earlier, following 1.5 per cent growth in October. For 2017, food services and drinking place sales growth is on a path to be up only 2.3 per cent from last year, which compares with an 8 per cent gain in 2015 and a 6 per cent increase in 2016.

Total retail trade and food service sales across the entire economy were up 6.4 per cent from a year earlier in November, the best year-over-year gain for any month in 2017. That is not a statement that could be made for food sector retail sales. Consumer spending has been rock-solid during the past year relative to the forces that are usually assumed to drive consumer behavior.

Growth in wages and salaries, as well as disposable income was anemic in late 2016 but has gotten back on a positive track in 2017. This provides some encouragement for continued gains in consumer spending in the coming year, which could translate into favorable trends in retail sales.

Food sector sales as a per cent of total retail trade have been declining throughout this year, with the downtrend accelerating during the last quarter of the year. In light of this trend, the performance of beef demand was impressive.

Daily Livestock Report - Copyright © 2008 CME. All rights reserved.

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