The Forecast Looks Good for Grilling, And That's Great News for Meat Demand
Memorial Day weekend marks the unofficial start to grilling season, and there are many sunny and warm weather days ahead.
“From what I’ve seen the weather forecast, it looks like we're going to have clear sailing for firing up a lot of grills,” says Don Close, chief research and analytics officer with Terrain.
Favorable weather could help entice more cookouts even as inflation is dampening some of that demand.
“The first thing I’m going to say is demand is still very good,” says Close. “Now, with that said, are we clearly seeing signs of softening demand across all species? We absolutely are.”
And with the federal reserve weighing the possibility of more rate hikes this year, the impact on meat demand is something economists are watching.
“We have some things we need to be watching and certainly as inflationary pressures and recessionary threats impact consumer spending, we're seeing it in the meat case,” Close adds.
Impacts of Inflation on Demand
There’s no denying that inflation has put pressure on many Americans. Glynn Tonsor, agriculture economist professor and livestock economist at Kansas State University, watches demand closely each month through the Meat Demand Monitor.
“Meat protein demand in the U.S. is still higher today than it was before the pandemic, so, this is not doomsday, per se,” says Tonsor. “It's comparing to a fairly high peak that we had roughly a year ago and many of these metrics. So, yes, demand has eased. But some context is important.”
He says his data shows meat demand peaked last year.
“Specifically about the middle of 2022, depends on the cut and the species and the product of what month, I’d say it peaked. It was somewhere between April and July of 2022,” Tonsor explains.
Tonsor says what is key to know is while demand may have peaked, it was at historically high levels. But today, domestic demand is softening.
“My opinion is that the broader macro-economic situation, and even more narrowly personal finances for many households, are put in a pinch on wallets,” he says.
Post Pandemic Meat Demand
The surge in meat demand- despite higher prices- happened longer than many economists thought. One reason may be the number of Americans who built up their savings during the pandemic, from less travel and staying at home more. Add to that all the pandemic payments from the federal government.
According to the IRS data, three rounds of stimulus money created more than 476 million payments. And the grand total? More than $814 billion dollars. And Tonsor says that further boosted those household savings numbers.
“That allowed a bigger cushion to absorb higher meat prices. And households, remained willing to do that for some time, as long as they had those built up savings," he says.
Now that many households have chewed through those extra savings, while also paying more for many items, Tonsor says the demand monitor shows financial sentiments are waning.
“We ask how your financial situation for household is now compared to one year ago. And there's more people that say it's worse. And there's fewer people that say it's better, both compared to April of '22 and April of '21,” says Tonsor.
Different Stories Brewing in Pork and Beef
Close says at the retail level, the current price spread on retail pork versus pork cutouts is creating a very unusual situation.
“Retail port prices are softer than they were but still right at their highs. But the price spread between retail pork prices and pork cutout values is incredibly wide,” says Close.
With cash hogs under intense pressure, he thinks it could also cause pork prices at the meat counter to retract, beef is seeing the opposite story play out. He says even with the current drop in cow slaughter, the percentage of heifers in the fed slaughter mix is still incredibly high, and according to Close, that’s a sign liquidation will continue.
“Because of the weather influences, particularly across the northern feeding states, this market is performed as if it is a sprint, and this market is a marathon. We haven't got to our tightest numbers yet. So this market will continue, by all rights should continue ’23, ‘24 and even in ‘25," he says.
The test may come when retail beef prices continue to climb, and if Americans are willing to dish out more for certain cuts of meat. Close thinks some shoppers may be forced to trade down to less expensive cuts of meat.
But today, Americans are still hungry for protein, and more specifically, they’re hungry for meat.
“The public wants meat in their diet. I think their ability to pay for it is going to improve in the next 24 months. Specifically on pork and chicken,” says Tonsor.
Close’s request this holiday weekend to help that demand? It’s short and sweet.
“I just encourage consumers to go out there and fire up those grills,” he says.
It’s a big weekend for driving meat demand as peak summer demand heats up.
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