Page 6 - MWC 8-20-20s

The Midwest Cattleman · August 20, 2020 · P6
BEEF DEMAND AND MACROECONOMICS

By Derrell S. Peel, Extension Livestock Marketing Specialist, Oklahoma State University

The U.S. economy was food service demand and all beef consists of a couple of
wracked like never before in obscured by temporary sup- components. Underlying
the first half of the year. The ply shortages that reduced consumer preferences deter-
Bureau of Economic Analy- overall beef availability. Re- mine overall demand for beef.
sis (BEA) released prelimi- cord overall wholesale and Tastes and preferences tend
nary estimates showing that retail beef prices masked a to be relatively stable, evolv-
U.S. Gross Domestic Product variety of impacts in various ing over longer periods and
(GDP) declined by an unprec- beef product markets relat- generally appear strong, i.e.
edented 32.9 percent year ed to the type of demand for beef is popular. In the short
over year in the second quar- the product and the ability to run, willingness to purchase
ter of 2020. This follows a five shift product from food ser- beef will depend on the rela-
percent first quarter decrease vice to retail grocery supply tive prices of other products,
compared to last year. This chains. particularly substitute prod- phasize this impact going for-
highlights questions about Beef supply conditions ucts that may be consumed ward.
the impact of the pandemic on have stabilized, albeit at high- in place of a particular prod- Ability to purchase a prod-
beef demand in the first half er levels of production year uct. For specific beef products, uct is related to the level of
of the year and, more impor- over year in the second half this is a complicated consid- consumers’ discretionary in-
tantly, beef demand for the of 2020. Beef demand will be eration, including other pro- come. Consumers must have
remainder of the year. critical in determining overall teins such as pork and poul- income to purchase a product
The first half of 2020 was a beef prices and, subsequently, try, as well as the multitude regardless of how much they
confusing mix of beef demand cattle prices going forward. of other beef products that desire the product. General-
and supply dynamics, compli- Beef demand, as for any prod- may be chosen by consumers. ly, macroeconomic conditions
cated by dramatic disruption uct, is generally a function of In periods of low income, beef including overall GDP levels
of beef supply chains. Overall consumers’ willingness and consumers may “trade down” along with unemployment
beef demand was difficult to ability to purchase specific from high cost beef products are indicative of income lev-
judge accurately as surging quantities of the product at to lower valued products. els. The U.S. economy is in
retail grocery demand was various prices of the product. Food service demand, which continued on page 24
offset by sharply diminished Willingness to purchase remains diminished, will em-

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