It’s a balancing act — consumer demand, economic challenges and beef pricing.
“The consumer has been saying I’m willing to work a little bit more to pay for that pound of beef,” says Lance Zimmerman, RaboResearch Food & Agribusiness senior beef industry analyst. “That’s a positive demand story.”
Zimmerman’s analysis has found that regardless of income bracket, consumers are willing to work more minutes to afford a pound of beef.
According to Zimmerman:
- Highest income earners work about 6 minutes to buy a pound of ground beef
- Lowest income earners work two to three times longer — around 26 minutes
- The median (middle 50%) works about 14 minutes to purchase a pound of ground beef
Zimmerman says his research suggests U.S. minutes worked to pay for a pound of USDA Choice beef or ground beef at retail might have been higher in the late 1970s or early ‘80s.
“Using an adjusted disposable personal income as a proxy, suggests the highs may have been 1979-1980, but the price points experienced in 2014-2015 would have been a close second,” he explains.
The uptrend beef demand has experienced recently is indicative of the demand growth for beef since the 1998 lows.
“It shows an increased willingness to pay from U.S. consumers in terms of minutes of labor allocation,” he explains. “This is why it is so important for the U.S. beef industry not to get hung up on a price point. They shift with income changes.”
The USDA Choice retail beef price has been above $9/lb. since June, and the 2025 annual average will certainly be above $9/lb. At the 2015 annual highs, the average price was $6.29/lb., but income growth created opportunity for beef price increases to be substantially higher before hitting the recent highs in minutes worked for a pound of beef – either USDA Choice beef or ground beef.
“My opinion is that we need to stop saying beef is a luxury item,” Zimmerman says. “It is for a portion of the population, but for many, it’s just another price that has increased. Convert beef prices to minutes worked per lb. There is a long-run uptrend, but relative prices aren’t crazy today.”
Don Close, Terrain senior animal protein analyst, has also tracked beef prices compared to hourly wages. He says when he correlates the monthly all fresh beef price to hourly wages, he found they are in lockstep.
“Yes, beef prices have escalated, but beef prices have not risen any faster than the improvement in overall hourly wage,” Close explains. “So, from the consumer’s perspective, their share of their paycheck committed to beef is essentially the same as it’s been on a comparative basis for years.”
He says the Bureau of Labor Statistics post the average hourly wage by month, for the year-to-date average hourly wage is $36.17 an hour.
“The calculations I have run are for All Fresh Beef,” Close says. “I have 14.21 minutes to buy a pound of beef. I have the numbers for pork, and comprehensive broilers as well. I believe the data. I have gone so far as to walk grocery stores and run the numbers.”
He adds the analysis looks at absolute basic commodity items.
“As soon as you start looking at any value-added products the price escalates,” Close says.
How High Can Beef Prices Survive?
“From a production standpoint, we’re continuing to check all the right boxes,” Zimmerman says. “We’re continuing to produce better, high-quality, very safe, nutritious beef. As long as we see some gains in income and a strong labor market going forward, there’s further opportunities for this beef, and cattle market by proxy, to have some additional runway.”
He predicts retail beef prices can easily be supported above $9 and probably $9.50 to $10 by the end of the year.
Two Threats to Beef Demand
“This is not a risk-free environment from a demand standpoint,” Zimmerman says. “The reason the analyst and economist community has said demand has some threats is because the threats are real.”
He outlines two key threats to consumer demand:
1. Economic Threats: He points out housing affordability, student loan debt, credit card debt and the “buy now, pay later” credit services are economic challenges facing today’s consumer.
2. Consumer Behavior Threats: These challenges include potential drop in income, recession risk and multiple financial pressures competing for consumer dollars.
Zimmerman’s message is that while these threats exist consumer demand remains resilient. He suggests the industry must monitor these potential disruptions while understanding consumers’ continued willingness to prioritize beef purchases.
Consumer Adaption
Zimmerman says consumer adaptation strategies are minimizing the stress of higher beef prices.
He explains today’s beef consumer is cooking more meals at home, increased couponing, buying more in bulk, seeks deals through shopper ads, leans toward discount retailers and a growing preference for store brands/private labels.
Consumers are shifting within the chain, rather than out of the beef supply chain, he explains.
“For example, the cost of an at-home meal has increased around $1.50/meal since 2005, but the cost of a restaurant meal has increased nearly $10/meal in that time,” he says. “So, consumers are choosing to buy more at retail and eat out less frequently. That doesn’t necessarily hurt beef as long as it remains a part of that at-home meal solution.”
Close adds three other key factors impacting consumer demand:
- Protein craze. Close points out the number of “center-of-the-aisle” items that have grams of protein or protein added on the packaging. He adds consumers realize, “Beef is king as the original protein source.”
- Processing efficiency and value options. “We’re doing such a good job of trimming that there’s essentially very little or zero waste,” he says. “New cuts like petite tender and Denver steak fit portion control better with the smaller households.”
- The wealth effect. “If you look at the consumer wealth index and the equities market and when the housing market is strong, consumers feel the wealth effect that improves their confidence to spend money,” he explains. “Even if their salary alone, they might be in a position maybe to draw back a little bit, but those with those secondary wealth drivers going on, they just feel better about the world.”
Zimmerman summarizes today’s consumer is not choosing to substitute beef.
“As beef prices go up, all else equal, consumers don’t just default run,” Zimmerman says.
“Beef is expensive, and yes, the consumer has said it’s expensive, but worth it.”
