Measuring Beef Demand

1 / 38
0
0
1287 days ago, 344 views
PowerPoint PPT Presentation

Presentation Transcript

Slide 1

﻿Measuring Beef Demand James Mintert, Ph.D. Teacher & Extension State Leader Department of Agricultural Economics Kansas State University www.agmanager.info/domesticated animals/showcasing jmintert@ksu.edu

Slide 2

A Picture of A Healthy Industry

Slide 3

A Shrinking Industry Responding to a Lack of Profitability Current stock is around 26% littler than in 1975

Slide 4

Rising Productivity Is Partially Responsible

Slide 5

But Declining Consumer Demand for Beef Was A Key Factor

Slide 6

Beef Market Equilibrium P S P E D Q E

Slide 7

Beef Market Equilibrium P S P E request decrease P 1 D 1 Q E

Slide 8

Goal of Beef Demand Index Provide a basic method for following interest changes Provide inexact measure of interest move, contrasted with base year & late years 1980 utilized as base year Coincides with estimated begin of interest decay

Slide 9

How Do We Compute Demand Index? Modify all costs for swelling utilizing an expansion record (Consumer Price Index) Need to separate between development along a current request bend & moves sought after Price changes owing to changes amount are basically development along a current request bend

Slide 10

Beef Market Equilibrium P S 1 P E P 1 Movement from P E to P 1 is development along a current request bend, i.e., no request "move" D Q E Q 1

Slide 11

How Do We Compute Demand Index? So we first register a "normal" expansion balanced meat cost "Expected" hamburger cost utilizes cost as a part of base year as beginning stage Use a measure of how responsive hamburger costs are to changes in amount to ascertain "expected" cost Calculate expected cost, if request was held consistent at base year's level, based upon change in per capita hamburger amount accessible since base year

Slide 12

Beef Demand Index & Price Responsiveness to Supply Shifts Price Flexibility gives a measure of rate cost change expected given a 1% supply change Price Flexibility utilized is - 1.49 1% for every capita supply increment anticipated that would yield 1.49% decrease in swelling balanced value Actual record values subject to decision of value adaptability, however example of interest to a great extent unaltered (Marsh, 2003)

Slide 13

How Do We Compute Demand Index? Hamburger Demand Index approaches Actual swelling balanced retail meat value X 100 Expected expansion balanced retail meat cost

Slide 14

The Index Documents Demand Decline Beef Demand 1980-1998

Slide 15

Beef Demand Decline Was Devastating What's the linkage between retail meat request & dairy cattle makers? Retailers interest for discount meat is gotten from interest for retail hamburger items Packer interest for sustained steers is gotten from interest for discount hamburger items Feedlot interest for calves & feeder steers is gotten from interest for nourished cows

Slide 16

Beef Demand Decline Was Devastating Who bore brunt of long haul meat request decay? Feedlots & hamburger processors? No, edge administrators conformed to request diminishments Answer: Cow-calf makers How? Bring down returns for bovine calf makers Labor Land Other capital Why? Industry measure choices are made by dairy animals calf makers

Slide 17

Index Also Documents Demand Increase 1998-2004 Demand in '04 Was Up About 25% from 1998 Level

Slide 18

What Happened in 2005? 1998-2005 Beef Demand During All of '05 Decreased About 4% But Demand in '05 Was Still Up About 21% from 1998 Level

Slide 19

Demand Improved Steadily from '98 through '04 Downward Blip in '02 Following 9/11

Slide 20

Downturn Got Underway in mid-2005

Slide 21

Beef Demand Shifters What's been occurring as of late? Request record does not show why shifts happen Possible explanations behind late downturn Low carb abstain from food impact has worn off Larger chicken supplies Consumer's discretionary cashflow development abating Expect more local request shortcoming How would we turn this around?

Slide 22

Slide 23

U.S. Was A Net Exporter From 1981-2003

Slide 24

Top 5 Importers Accounted for 91% of U.S. Sends out U.S. necessities to recover these business sectors to recapture \$'s and volume

Slide 25

Slide 26

Result: U.S. Imports Falling Below 2005's

Slide 27

Long, Slow Road to Export Recovery

Slide 28

Export Recovery Means Net Beef Imports in 2007 Could Be 1/2 2004's

Slide 29

Are Retail Demand Changes Reflected At Farm Level? 1% expansion in hamburger request file expands Slaughter steers cost by 0.49% Slaughter steers supply by 0.17% Feeder steers cost by 0.12% Feeder cows supply by 0.34% Source: Marsh, American Journal of Ag. Econ., 2003

Slide 30

Are Retail Demand Changes Reflected At Farm Level? Hamburger Demand Increased around 6% from 1998 – 2000 Boosted customer spending on meat by \$2.16 billion Estimated maker share around 42% Estimated processor & retailer share around 58% Source: Marsh, American Journal of Ag. Econ., 2003

Slide 31

Do Farm Level Demand Changes Mirror Retail Demand Shifts? Spread amongst retail and homestead level costs is variable Variability owing to assortment of elements Volume Capacity use

Slide 32

Margin Shifts Can Mask Impact of Retail Demand Shifts

Slide 33

Retail versus Cultivate Level Demand Policy Implications Retail meat request is essential request Demand for sustained & feeder steers got from retail hamburger request Retail hamburger request movements are felt at homestead level In short run different components, fundamentally edge variety, can cover effect of retail meat request moves In long run, shopper request is principal

Slide 34

Index Concerns Quality of retail value information Relying on Bureau of Labor Statistics costs Prices are not volume weighted Omits all of HRI exchange

Slide 35

Improving The Index Develop Index utilizing scanner based retail value information Included in Mandatory Price Reporting enactment Scanner based costs are volume weighted Better measure of what buyers pay But we require A more extended information arrangement Research that records value adaptability with new costs Still precludes HRI exchange Longer term is a stage in the right bearing

Slide 36

Is Another Demand Measure Needed? What's the goal? Buyer activity choices ought to depend on purchaser level request data Demand measures at other advertising levels Wholesale Farm Will be driven to a limited extent by edge variety

Slide 37

Is Another Demand Measure Needed? Request Indexes don't clarify why request moved Development of other request measures will require examine/data with respect to why request measures vary Differences will concentrate vigorously on edge variety