In today’s Beef Buzz, senior farm and ranch broadcaster Ron Hays features comments from three leading beef economists — Dr. Derrell Peel, Don Close, and Nevil Speer — about one of the biggest questions facing the cattle business today: at what point, if any, will consumers back away from beef prices that continue climbing higher? The three recently spoke at the U.S. Meat Export Federation’s spring meeting in Oklahoma City about demand.
Beef Demand Still Holding Strong
For now, Dr. Peel says the data does not show consumers abandoning beef. “Economists define demand as the willingness and ability to pay,” Peel said. “The current situation tells us right now consumers have both — they’re doing fine.”
Peel pointed to changes in eating habits that emerged during the pandemic as part of the explanation for beef’s resilience. “A lot of the preferences and the willingness that we see in that I think does relate back to Covid, and the way people learned to cook and eat and so on during that time period,” he said.
That does not mean higher prices come without consequences. Dr. Peel explained that shrinking beef supplies naturally push prices upward as markets ration available product. “The thing that could threaten demand would be ability,” Peel said. “Those demand curves slope downward as supply goes down — there’s less beef and prices will go up to ration a smaller supply.”
At some point, some consumers may buy less beef, but Dr. Peel argued that is not necessarily the same as demand destruction. “Some people are going to eat less beef, but it’s not because of demand destruction,” he said. “It’s just because there isn’t as much beef, and the way markets work is we find out who wants it the most and they win the bid.”
Peel also emphasized that beef demand is much more complex than one single market. “Beef is thousands and thousands of different products,” he said. “Every one of them is a different market that has a different demand.”
After closely watching wholesale markets for signs consumers are stepping away from premium cuts, Peel said he still has not seen major evidence. “I’ve been watching the wholesale market for the last three years looking for evidence — so when we talk about trading down and so on — there isn’t a lot of it yet,” he said.
Don Close: Some Consumers May Be Trading Down
Close agreed beef remains competitive with other proteins but offered a more cautious outlook. “This is one point I’m going to be a touch cautionary,” Close said. “Our Terrain data, the core data, shows beef is not only gaining, but we continue to gain on the other species.” “I don’t think we’re to a point where beef is losing ground to the other species,” he added.
Still, Close believes economic pressures may be beginning to influence buying behavior, especially after a prolonged period of higher fuel costs. “My pause is we’re 65–70 days now into a period of a $1-plus gallon increase in gasoline,” Close said. “When we get the hard data from the last 60 days, what we’re expecting is we don’t think we’re losing them to the other species, but we do think we’re seeing some evidence that they’re starting to trade down that beef ladder.”
Close described consumers potentially moving from premium cuts toward lower-cost options. “From a ribeye to a strip, or strip to a sirloin, and all the way through,” he said. “I’m touch cautious.”
Retailers and Restaurants Still Need Beef
Dr. Speer added another layer to the discussion, arguing that the consumer equation is not just about sticker shock — it is also about how retailers and restaurants view beef as a driver of traffic and repeat business. “Yes, the consumer is of consummate importance,” Speer said, “but retailers increasingly understand that having beef and high-quality beef is the cornerstone to getting consumers to keep coming into their store — repeat or comeback customers.”
Speer said retailers may be willing to sacrifice some margin on beef if it gets shoppers through the door and filling grocery carts with other items. “Food retail is such a tight-margin business,” he said. “How much are they willing to eat margin to get you there and then for you to fill your cart otherwise?”
Restaurants may operate similarly. “My favorite joke is you’re going to buy a steak and they’ll eat some margin because they’re going to sell you a $15 bowl of Brussels sprouts,” Speer joked. “At some point, too, they might be willing to eat some margin.”
Ultimately, Speer said today’s beef market reflects a changing and complicated relationship between pricing, consumer behavior, and supply chains. “It’s a really complicated — and it’s a new dynamic,” Speer said. “This is a new time in terms of what we’re seeing with consumers.”
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Ag Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR above for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
