Two recent studies from Kansas State University economists show consumer incomes are very sensitive to price increases for beef, while top-quality branded products are more immune.
Previous research documents the importance of consumer incomes and personal consumption expenditures on beef demand. Increases in income lead to increases in demand (i.e., a shift out and to the right) for consumer goods, including beef, because consumers increase their expenditures as incomes rise
A chart of U.S. consumer disposable income and personal consumption expenditures since 1980 from the U.S. Department of Commerce shows long-term growth in the economy progressing in lockstep with "personal consumption expenditures."
The two lines took a large dip in the 2008-2009 timeframe.
The economists said this chart also makes it clear that U.S. consumers tend to consume most of every dollar of additional income as personal consumption and that when disposable income declines that consumption declines.
However, they also noted that declines in spending can be slightly greater than declines in income based on consumer confidence. That's because consumer confidence is partly measured by the personal savings rate, which then impacts demand.
When consumers are more confident about their economic prospects, they tend to reduce their savings rate. When confidence declines, the savings rate increases. In the short run, dollars devoted to savings are not available for consumption.
Further, as all meat prices have risen in recent years consumers have cut their consumption, the researchers said.
Overall, U.S. consumers' per capita consumption of meat and poultry declined nearly 10%. It fell from a peak of 221 pounds in 2006 to 202 pounds in 2012.
Beef consumption declined more than pork or chicken, falling to 57.4 pounds in 2012. That was a 13% decline from 2006 levels. In contrast, pork and chicken consumption both declined about 7% in the same period.