Despite the spectre of inflation, the outlook for Canadian beef is relatively rosy in the U.S.
Canadian beef exports to the U.S. were up 20 per cent in volume and 66 per cent in value as of November 2021, compared to the five-year average. Imports of Canadian beef into the U.S. increased three per cent in volume and 30 per cent in value in Nov. 2021 compared to Nov. 2020. While year-over-year beef import volume increases in August, September, and October 2021 (which were up between 18 and 20 per cent) dwarfed November’s three per cent gain, November 2021 imports were still historically large.
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Inflation looms large in the U.S. with the Consumer Price Index (CPI) up seven per cent in 2021 from 2020. Beef and veal items in the CPI were up between nine and 10 per cent in 2021. A further two to three per cent price increase is forecast for beef and veal items in 2022. Twenty-one states raised their minimum wage this January, including states with historically high beef steak demand (e.g., Washington, California, Minnesota, Illinois, and New York), providing support for sustained higher prices. As U.S. beef production is forecast to decrease by three per cent in 2022, this may leave room in the U.S. market for high-quality cuts of Canadian beef.
In November 2021, U.S. beef imports increased 27 per cent from November 2020. Imports decreased from Australia (-14 per cent), but increased from Canada (up three per cent), Nicaragua (+18 per cent), Uruguay (+24 per cent), New Zealand (+33 per cent), Mexico (+75 per cent), Brazil (+84 per cent), and Argentina (+960 per cent). Imports may have continued to surge into January of 2022 as slaughter plants navigated the logistics of absenteeism from rising Omicron cases. A back-up of fed cattle and a strong U.S. dollar compared to the U.S. beef price is supportive of higher imports. Historically large beef cow slaughter from drought conditions in the U.S. will continue to support trim supplies in 2022.
Resistance grows to higher beef prices
U.S. retail beef demand remains strong, but the question is, for who? According to the Kansas State Meat Demand Monitor, the U.S. consumer’s willingness to pay for rib eyes at retail continued its upward climb in December 2021 to US$18.22/lb, seasonally slipping but steadily increasing to be up 13.2 per cent from December 2020.
Demand for rib eye steak is strongest among U.S. males, under 55 years, with household incomes over US$100,000, who also ate beef at a meal the previous day. For everyone else, there is evidence of resistance to higher beef prices emerging. From November to December 2021, the all-fresh and U.S. Choice retail beef prices declined two per cent, for the second consecutive month of lower retail prices. March 2022 features have reportedly been put on hold. It is likely retail demand is shifting to lower-priced cuts of beef for the average U.S. consumer. Concerning ground beef, U.S. consumers were still willing to pay US$9.28/lb at retail in December 2021, 25.6 per cent higher than December 2020.
Americans stick close to home for meals
Lunch and dinner are the most common meals for beef consumption and these meals are still primarily being consumed at home. Kansas State research suggests about half of Americans consumed lunch at home in December, with just one-third reported having eaten lunch away from home (the remainder having skipped meals). At dinner, two-thirds of Americans ate at home in December 2021, versus 12 per cent who ate out. For those having dinner away from home, they were predominantly at casual dining or quick service locations.
The market share of beef consumed at restaurants decreased from 41 per cent in November 2021 to 39 per cent in December 2021, with pork increasing from 15 to 16 per cent, but beef hamburger remains the most common selection at food service. The U.S. consumer’s willingness to pay for both rib eyes and hamburgers at restaurants was about $3 higher per meal in December 2021 compared to December 2020.
