Measuring Beef Demand

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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

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A Picture of A Healthy Industry

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

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Rising Productivity Is Partially Responsible

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But Declining Consumer Demand for Beef Was A Key Factor

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Beef Market Equilibrium P S P E D Q E

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

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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

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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

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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

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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

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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)

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

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The Index Documents Demand Decline Beef Demand 1980-1998

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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

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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

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

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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

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

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Downturn Got Underway in mid-2005

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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?

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What About The Impact of International Trade?

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

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

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Beef Imports From Canada Decline

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

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Long, Slow Road to Export Recovery

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

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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

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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

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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

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Margin Shifts Can Mask Impact of Retail Demand Shifts

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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

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

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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

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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

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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

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