Where is per capita consumption headed in 2012? The quick answer is “down, pretty much across the board.”
Figure 1 shows historical data and forecasts for 2011 and 2012 from the Livestock Marketing Information Center (LMIC) in Denver. Total consumption of the four major species is projected to be 206 lb./person this year, down 0.6% from last year. Next year (2012) is projected to see Americans consume 202.7 lb., on average, 1.6% less than in 2011.
This year’s projected decline is obviously the continuation of a trend that began in earnest in 2008. But the downtrend has its roots even earlier. The actual peak in per capita consumption came in 2004 at 220.1 lb./person. That year, of course, was the zenith of the Atkins diet’s popularity. Since the diet’s waning – in my opinion, because it was expensive, not because it was ineffective or dangerous – Americans have reduced their per capita meat intake every year except 2006, when they ate a paltry 0.4 lb. (0.2%) more than in 2005. (See Figure 2)
After the 2004 peak, U.S. per capita consumption remained within a pound of 220 lb. until 2008, when it fell by 5.5 lb. (2.5%). The decline was led by lower beef consumption, but only turkey was able to maintain consumption levels that year.
But we need to always remember why per capita consumption changes. “Consumption” in the vernacular of the meat business is another word for “disappearance” in that we don’t really know where the meat goes. We only know that we cannot account for that amount of production and imports going to exports or changes in the level of freezer stocks. All we know is that it was once in the U.S. supply and it isn’t any more. It disappeared and we conclude that someone or something consumed it. We may be wrong, but it’s the best we can do.
Consumption is positively related to production, thus these levels of consumption are, in fact, the amount of product made available to U.S. consumers each year. From that view, one can correctly conclude that this five-year (and likely six-year) decline in consumption has been primarily driven by the lower quantities of product that have been available to U.S. consumers – either due to lower output or to higher exports.
Lower availability leads to higher prices so long as demand remains relatively constant. We have seen those higher prices for beef, pork and turkey. Why haven’t chicken prices risen? As Figure 2 shows, per capita chicken consumption/disappearance/availability has increased in 2010 and 2011 by 3.2% and 1.2%, respectively. LMIC and most other analysts with whom I’m familiar predict that the broiler industry will see its second round of cost-driven cutbacks in 2012, with U.S. product offerings falling by 2.9%. The process is already underway as the broiler flock has declined slightly and egg sets and chick placements have fallen by about 3.5%, each, since May 1 and June 1, respectively.
As for per capita pork consumption, LMIC predicts that it will increase slightly in 2012, driven primarily by higher productivity levels. While I have slaughter data for the first half of 2012 up 1.2% from 2011, and believe it will exceed this year’s levels by 1% or so in the second half of 2012, I think average slaughter weights are likely to fall due to high feed costs and less slack in finishing facilities. Add in continued growth in exports – a 5% increase now takes a full 1% out of U.S. availability – and I find it difficult to pencil in any increase in per capita pork consumption for 2012. It will be close and zero change is a likely result.
Does this mean Americans are turning their back on meat in general and pork in particular? I believe that was certainly the case from 2004 through 2009, when retail price increases (lower availability = higher prices) were not large enough to support constant consumer-level demand. But the data tell us that U.S. consumers are willing to pay a lot for the amounts of meat and poultry we are now delivering, meaning that demand has increased.
When consumers are willing to pay and we don’t deliver enough product, it’s not their fault that per capita consumption falls. But neither is it ours in that, in this brave new world of $7 corn and $350 soybean meal, we simply cannot afford to bring them enough product to keep prices low. We would like to deliver a more affordable product, but we simply cannot right now and, as you’ve seen here many times, consumers must eventually pay all costs.
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Steve R. Meyer, Ph.D.
Paragon Economics, Inc.