Beef in Grocery store

The COVID-19 pandemic, and the resulting economic downturn, will continue to impact consumer demand for beef.

Brenda Boetel, an ag economist at the University of Wisconsin-River Falls, says many projections have the global economy contracting by 3%. For the U.S., that number could reach as high as 5.7%, she says.

“Beef is a perishable product, and consumption typically occurs shortly after production,” Boetel says in her In the Cattle Markets report. “A consistent relationship between consumption and production exists. Consumption does not reflect consumers’ perception of beef in the marketplace, but instead is a function of production.”

“Consumption is calculated as beef production plus imports minus exports and disappearance. The remaining is assumed to have been consumed. For the second quarter of 2020, overall beef consumption is expected to be down 12.5% from 2019.”

She adds that while most beef that is produced is consumed, it does not translate automatically into a consistent connection with beef production.

“Beef consumption can increase without an increase in beef demand because beef demand and beef consumption are not the same thing,” she says. “For example, beef consumption might increase because more beef is produced, but beef demand decreases because consumers are willing to pay less for each pound of beef they do consume.”

Higher meat prices traditionally factor into meat consumption, Boetel says.

“Demand reflects consumers’ perceptions of beef in the marketplace and is representative of consumers’ willingness to pay for beef,” she says, adding Kansas State University’s beef demand index in April showed a nearly 18% decline in demand from April 2019.

The pandemic has resulted in massive changes to the foodservice industry, which typically uses more than half of all U.S. beef production.

She says it may be a while before beef demand begins to improve, adding restaurants will likely make menu changes, offering lower-prices entrées and other price incentives to their customer base.

“Beef products consumed through foodservice vary from those products consumed through retail,” Boetel says. “The market saw this disruption and change in where beef is consumed manifest through the narrower spread between round and rib primals. Although this spread has begun returning to pre-COVID levels, it will likely experience volatility until the restaurant industry had recovered.”

Jeff DeYoung is livestock editor for Iowa Farmer Today, Missouri Farmer Today and Illinois Farmer Today.