Rising cost pressures in the supply chain will test the consumer’s willingness to pay top dollar for beef products, according to a new report from Rabobank.
The agribusiness bank released its Q1 Global Beef Quarterly, which noted that cattle prices across most key beef-producing regions are at their highest levels in five years.
Increased demand has been a key contributor to beef’s price hikes, thanks in part to lockdown restrictions, additional disposable incomes from Covid stimulus packages and limitations on the availability of alternative proteins.
“With beef supply unable to keep up, the increase in demand has created an imbalance in the market and, as a result, beef prices have lifted,” said Rabobank senior animal protein analyst, Angus Gidley-Baird.
While, in many cases, the increases in retail beef prices have been among the largest in history, prices for many other proteins remained stable or contracted. However, with consumer demand being a significant contributor to beef’s rising cost, it’s so far been stomached at the checkout.
“While price rises in beef have been dramatic, the fact they have been largely caused by consumer demand has meant they have been accommodated. That is, consumers have been willing to pay higher prices to continue consuming beef,” Gidley-Baird said.
How much more they’re willing to accept, however, could soon be tested.
Inflationary pressures in the supply chain, including labour, freight, energy and feed costs are intensifying and costs will be passed on to the consumer.
“Some of the cost pressures – such as freight, energy and feed – are cyclical and over time are expected to decline, allowing for some easing in 2022. However, a number of cost increases – those associated with labour and sustainability for example – will be permanent and will need to be accommodated within the supply chain,” he said.
“Further increases in beef prices run the risk of consumers substituting other proteins or reducing their overall consumption. And we are starting to see signs they might be reaching their limit.”