As experts expected, final calculations for 2019 demand indexes showed strong increases for both beef and pork, says agricultural economist Len Steiner in his Daily Livestock Report.
The Livestock Marketing Information Center (LMIC) calculates demand indexes for pork and beef. This index is driven by two primary factors, per capita retail pork (beef) consumption and retail pork (beef) prices.
Per capita consumption is a measure of product availability, Steiner explains. Demand, on the other hand, is the consumer’s willingness to purchase a good at a given price depending on their tastes and preferences. Prices used in the demand index are deflated using the consumer price index with 2000 as the base year.
Pork Demand Index
The 2019 pork demand index was 107.44, a 10.1% increase over 2018.
“Much of the increase in the demand index is due to per capita consumption which increased 2.6%, over the prior year, to 52.27 pounds per person, the highest level in two decades,” Steiner says.
In 2019, there was more pork available for consumers to purchase as commercial pork production increased 5.0% to 27.6 billion pounds. The 2019 retail pork price was $384.33 cents per pound (nominal), a 2.6% increase over 2018, he says.
“In real terms, pork prices increased 0.9%. If pork remains competitively priced coupled with an LMIC forecasted 3.8% increase in pork production, the pork demand index could see further improvements in 2020,” Steiner says.
Beef Demand Index
The retail all fresh beef demand index value increased 2.3% in 2019 to 109.02 for 2019. This is the highest level since 2015 (111.59), Steiner says. In 2019, per capita retail beef consumption grew 1.3% to 57.95 pounds per person continuing the trend which started in 2014.
The most recent high in per capita consumption of retail all fresh beef was 2010 at 59.58. Beef consumption wasn’t the only thing to grow, Steiner explains. Prices grew, too.
Retail beef prices were $581.94 cents per pound in 2019, also increasing 2.3% from 2018 in nominal terms.
“In real terms (CPI deflated), retail all fresh beef prices increased 0.6% in 2019,” Steiner says. “In 2020, beef supplies are expected to tighten on lower available cattle supplies which may push cattle prices higher, possibly impacting retail prices and perhaps shrinking the demand index.”
The demand index increases for pork and beef were good indications that demand was strong in 2019. This was a positive sign given production increased for both meats, he says.
In addition to LMIC forecasting increased production again in 2020 for total read meat and poultry, if per capita disposable income continues to increase in 2020, this lends support for continued strength in beef and pork demand this year, Steiner adds.