Question for Agman or anyone else on retail beef sales

[Anonymous]

In thinking about this whole closed Canadian border situation and how that affects U.S. cattle prices as compared to our export markets, I was pondering the point of diminishing returns on retail beef prices.

Isn't there a point where additional supplies would not have as much impact on retail beef prices because consumers are already backing away from higher retail beef prices and switching to poultry and pork???

When consumers started backing away from the higher retail beef prices last year, how would additional Canadian imports have affected that?
Seems to me that Canadian live cattle imports would probably have gone unnoticed from the standpoint of retail beef prices because consumers were already backing away from the higher retail beef prices.

How does that fit with the old rule of thumb that every 1% increase in supply creates a 1 1/2% decrease in cattle prices? There has to be a point of diminishing returns when consumers can so easily switch to cheaper poultry and pork.

Your thoughts?



~SH~

 

[agman]

Isn't there a point where additional supplies would not have as much impact on retail beef prices because consumers are already backing away from higher retail beef prices and switching to poultry and pork???

When consumers started backing away from the higher retail beef prices last year, how would additional Canadian imports have affected that?
Seems to me that Canadian live cattle imports would probably have gone unnoticed from the standpoint of retail beef prices because consumers were already backing away from the higher retail beef prices.

How does that fit with the old rule of thumb that every 1% increase in supply creates a 1 1/2% decrease in cattle prices? There has to be a point of diminishing returns when consumers can so easily switch to cheaper poultry and pork.

Your thoughts?

Response...The impact would be exacerbated as you would be adding production into a declining demand base. Demand would be more elastic meaning a given change in production will have a greater impact on price. The historical relationship of 1.68:1 (price change versus supply change) could easily go to 2:1 or greater. Have a great day.

 

[TARSman]

I believe that the beef industry also has to think about the competition for the consumer dollar it is in with pork and chicken a little more in this equation. In other words, yes, all things staying the same except for a greater supply of beef, maybe it would go to 2:1. However, if the price goes down a little because of a greater supply, then perhaps more people would eat more beef again instead of more pork and chicken, and that would give you a good look at where the industry is in terms of the profitability that is available at a point where the industry is very competitive with pork and chicken. That's the point we need to be looking for and studying in my opinion.

 

[PPRM]

I've been concerned about store prices going too high. As a kid in the 70's, our paradigm was that steaks were for rich people. We wouldn't have looked at the meat counter for anything except hamburger. I really feel in the late 80's and 90's is when this started to change. I'd hate for the consumer to assume they can't afford good steaks,

 

[RobertMac]

SH, I thought you knew supply/demand better than that?!?!

For those that want to get into a price war with pork and poultry, beef will lose every time. We're on the short end of conversion ratio, reproduction, and length of time to final product. The problem with beef sells is consumer perception of the product and the industry. Correct those and the consumer will and does pay more, but more importantly, more consumers will buy beef.

Oh, thanks Macon...I got my life back...and my wife thanks you! ;>O

 

[Anonymous]

RM: "SH, I thought you knew supply/demand better than that?!?!"

Yeh listen to you. I didn't see you add anything to the discussion.

The fact is, beef prices will only get so high before consumers back away from them and turn to cheaper proteins.

My question was, when beef prices reach that point, how does additional beef supplies affect prices AT THAT POINT.

Did you have an answer to that question?

Didn't think so!



~SH~

 

[Jason]

I can relate to a market being saturated or close to it. Consumers here have been awesome supporting beef, but I am seeing them run out of cash.

Gas and utility costs are chewing up larger and larger portions of their income and buying a 1/4 of beef becomes too expensive for many.

On the other side of it, my costs continue to rise so selling at the same price actually nets me less. I can't raise the price and expect to sell as much product. But if I can't turn a profit at the price offered, there is no point in doing the extra work.

Interestingly, the beef I just picked up was booked in back in January, now the wait is only 1 week. Either no one has fats ready, or they have no customers, or no cash to pay for processing. Maybe all of the above. I have 2 more ready but have no customers ready and I have no more freezer space. With the short wait however, I can sit on them, although they are costing me over a buck a day to feed.

 

[TARSman]

Once again, I'm not suggesting a price war or anything like that. Everyone knows it costs more to produce a pound of beef. The question is, "Assuming the beef industry is interested in not losing more ground in per capita consumption to pork and chicken, what does the price of beef have to be to avoid further decline, and how does the profitability of the beef industry (especially the cow-calf segment) compare to the others at that point?" I believe the beef industry needs to know more about this.