Beef industry suffers if consumers don’t eat out

Food consumption habits have been significantly disrupted by the COVID-19 pandemic.

Advanced monthly sales data from the US Census Bureau showed that as of April 2020, spending at restaurants and drinking places fell to less than $ 30 billion, down 55% from the average. for the three months preceding March 2020.

Although restaurant sales began to recover rapidly in the following months and, in fact, reached record levels in each of the past seven months, out-of-home food spending relative to grocery store sales remain below pre-pandemic levels.

Food sales in October accounted for 51.2% of total food consumption when grocery store sales were included, a smaller serving than each month from January 2017 to February 2020 and surprisingly lower than each month between. May and September 2021.

It appears that the general trend of recovering restaurant spending relative to grocery store sales has stalled, at least temporarily, well below its pre-2020 share.

Important beef restaurants

While the outlook for beef demand in 2022 remains strong, it should be noted that the beef industry is likely to face the greatest risk in the meat business if restaurant meals remain depressed from previous levels.

The included graph compares the evolution of food and beverage sales from the previous year, as well as the price evolution of Choice canned beef. Both lines represent a 12-month moving average to smooth out seasonality and other short-term factors. Data from 2020 has been omitted as severe changes in recent months distort the longer-term picture.

It is evident that there is a positive relationship between these variables, especially from 2000 to 2015. Over the period shown, the correlation of restaurant sales and canned beef prices of 0.45 highlights these series. tend to move together, while the correlations for pork (0.08) or chicken (-0.03) show little relation to restaurant sales.

Not surprisingly, premium beef products also have the best relationship to money in restaurants. Data availability limits the comparison period to 2005-15, and while the value of Choice canned beef continues with a correlation of 0.45 during this period, the branded cut of beef has a correlation of 0. 50, followed by Prime (0.48), Select (0.44) and unrated (0.36).

Even though sales of higher-quality beef in grocery stores remain strong, there is a lot at stake for beef to keep consumers’ money flowing through dining.

Beef prices depend on consumer demand

The willingness of consumers to spend money on dining out is only one piece of the demand puzzle in the coming year. Ultimately. the economics of consumer finances combined with confidence in returning to pre-pandemic travel and spending habits will play the largest role in returning restaurant spending to pre-2020 levels and continues to grow in the future. relatively stable pace observed since at least the early 1990s.

The outlook for livestock prices remains good in 2022 due to supply factors and strong international demand for beef, but domestic demand for beef remains critical to the outlook. The extent to which consumers revert to eating habits before the pandemic will be important for 2022 and beyond.

Brown is a livestock economist at the University of Missouri. He grew up on a diverse farm in Northwestern Missouri.