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09/12/12 13.55

Meat consumption and demand both in decline!

by Harish Posted on November 20, 2012, 5:22 PM

We have known for sometime that per capita meat consumption in the US has been on a steady decline. But, consumption is not the same as demand. For example, when prices rise or incomes fall, the per capita consumption of a product may drop but not necessarily the demand for the product. Animal advocates are interested in reducing per capita meat consumption, but they are even more keen on actually reducing the demand for meat. Meanwhile, the meat industry blames the decline on everything but a slump in demand. They have a pointafter all, driven by several factors including high feed costs, the retail price of all categories of meat have increased substantially during the last few years and it suggests an explanation other than reduced demand for the reduced per capita meat consumption. In this post, I examine if it is not just the per capita meat consumption but the demand itself that is also in decline. Lets begin first with a look at the consumption numbers. Per capita meat consumption to continue decline through 2013

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November 20, 2012

Meat consumption and demand both in decline!

October 9, 2012

The USDA, on November 16, released its most recent forecast of meat production and consumption through the rest of 2012 and the year 2013. These projections indicate a continued decline in the per capita consumption of all four major meat categories: beef, pork, chicken and turkey. The graph below plots the per capita consumption (as implied by per capita disappearance of a product into the market) of meat products beginning with 1966 (the first year for which per capita disappearance data is available for broiler chickens in the food availability data released by the USDA.)

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100 90 80 70 60 50

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Beef

Chicken

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Pork Not everything that can be counted counts, and not everything that counts can be counted. William Bruce Cameron, 1963
40 30 20 10 0 1966

Turkey

1971

1976

1981

1986

1991

1996

2001

2006

2011

Per capita chicken consumption is projected to drop by more than 8% in 2013 compared to the peak reached in 2006. During this same period, per capita beef consumption is projected to drop by about 17%. The per capita pork consumption is projected to drop by almost 11% since a recent peak in 2007 and the per capita turkey consumption is projected to drop by more than 9% since a recent peak in 2008. Nice. But is the demand for meat also in decline? The decline in per capita consumption does not necessarily imply a decline in demand. For any product, economists usually relate price and demand by considering a measure called the compensated demand elasticity. This measure for any product incorporates factors such as the share of income spent on the product, the percentage change in the price of the product and the percentage change in the per capita consumption of the product. The compensated demand elasticity is typically a negative fraction. For example, if it is !0.3 for a product, it means that if the price of the product increased by 1%, one should expect that its per capita consumption would reduce by 0.3%. It is a compensated metric because it aims to remove effects of income in this calculation. For example, it will correctly predict that the per-capita consumption of a cheap product (relative to income) like table salt will not change much with a change in its price. For each of the four categories of meat, the table below lists the compensated demand elasticity reported in a paper published in 2010 in the Journal of Agricultural and Resource Economics. This computation is based on quarterly USDA data from 1982 to 2007. The table lists the price in 2006, the corresponding inflation-adjusted price in 2006 (using the CPI Inflation Calculator provided by the Bureau of Labor Statistics) and the actual price in 2012 (my source for prices include USDA data on meat price spreads and the monthly USDA reports on Livestock, Dairy and Poultry Outlook.) Prices are in cents per pound by retail weight for each of the meat categories. The percentage change in deflated retail price multiplied by the compensated demand elasticity gives us the per capita consumption one would expect in the absence of a change in demand (listed in the second to last column). In the last column, the table includes the actual percentage change in per capita meat consumption during the same period from 2006 to 2012.
Changes in price, per capita consumption and implied demand for each category of meat between 2006 and 2012 (prices are in cents per pound of retail weight)

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Price in 2006 Beef Pork Chicken Turkey 397.02 280.80 157.07 77.00

InflationPrice adjusted in price in 2012 2012 cents 455.54 500.04 322.19 346.95 180.22 188.04 88.35 105.80

Percent change in deflated price 9.77% 7.68% 4.34% 19.75%

Compensated demand elasticity !0.420 !0.740 !0.099 !0.099

Expected change in per capita consumption !4.1% !5.7% !0.4% !2.0%

Actual change in per capita consumption !13.6% !6.7% !6.6% !3.6%

Take a look at the last two columns and note the larger percentage change in the last column in comparison to the last but one. The actual per capita meat consumption has declined far more than what can be attributed to changes in the price of meat brought about by any of the reasons usually given including reduced production, higher feed costs and drought. Nearly 70% of the decline in per capita consumption of beef since 2006 is likely due to a decline in demand. More than 93% of the decline in per capita consumption of chicken is also likely due to a decline in demand. Dear animal advocates, rejoice this holiday season in the knowledge that the demand for meatand not just consumptionis on the decline!
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Comments
Matt Ball 2 weeks, 4 days ago

You rock, Harish! Great work on everyone's part to bring about the awareness behind this decline! Paul Shapiro 2 weeks, 4 days ago

I echo Matt's comments. Thanks so much for this insightful--and promising--post, Harish! The animal movement keeps on winning. David Coman-Hidy 2 weeks, 4 days ago

Another amazing post! Always nice to see some hopeful news to remind us that real change is possible! Erik Marcus 2 weeks, 4 days ago

This is so incredibly good. It's wonderful to see such serious scholarship and hard numbers on this vitally important issue! Mahi Klosterhalfen 2 weeks, 4 days ago

Great work, Harish! And congrats to my colleagues in the US who make this happen! great stuff thank you so much, people are waking up.. it's happening. Kelly Great job! Reason for hope! John T. Maher China's consumption is rising faster than US consumption is declining 2 weeks, 3 days ago 2 weeks, 3 days ago 2 weeks, 4 days ago

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Laura Hart

2 weeks, 3 days ago

This is an excellent and uplifting piece. GREAT news-- very uplifting!! Thank you! Jon Camp Love it. Thanks, Harish! Jack Norris Really great news - thanks for figuring this out, Harish! Ben Davidow Great news and great analysis, thanks for posting this! Mary Prubant This is wonderful news. Great story. Thank you. Debby Sunshine Job well done! Reason to rejoice! I like your use of graphs! Robert Davy 2 weeks ago 2 weeks ago 2 weeks, 1 day ago 2 weeks, 1 day ago 2 weeks, 1 day ago 2 weeks, 1 day ago

Thank you for posting this insightful analysis. In this blog post I took a look at the global situation using (somewhat older) FAO data up to 2009. http://canberravegan.blogspot.com.au/2012/11/world-trends-in-consumption.html Lewis Bollard Thanks for the great analysis Harish! Steve Erlsten 1 week, 5 days ago 1 week, 5 days ago

Thank you for crunching the numbers! The impact of rising prices is in the back of my mind every time I talk about Americans' reduced meat consumption, and this backs up my hunch that actual demand is dropping! Mikael Nielsen This is great and I will share far and wide. Thank you!! Bea Elliott Sadly I have to agree with John T. Maher that China's consumption is rising faster than US consumption is declining. But on another positive note (sort of) we can see that animal ag is desperate to create and maintain "demand" for their meat by telling the Obama Administration that they MUST include agriculture in trade deals. Calling the EU "unreasonable", "unscientific" and "arbitrary" if they spurn US meat. I often wish there wasn't "free trade". http://nationalhogfarmer.com/business/us-trade-deal-eu-must-include-agriculture RespuestasVeganas.Org Good news!! :) Zia Terhune Are dairy and eggs declining as well? Harish 1 week, 1 day ago 1 week, 1 day ago 1 week, 3 days ago 1 week, 4 days ago 1 week, 5 days ago

Zia, fluid milk consumption is declining but I have not completed the analysis for dairy as a whole (it is non-trivial, unfortunately, because one has to convert cheese, yogurt, cream, etc. to fluid milk quantities at the farm). Also, the USDA did not make 2013 projections for dairy. Egg
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consumption is also largely declining, but there are some complications I am waiting to resolve to complete the analysis. Each of these is a topic for another post another time. Ben West 5 days, 10 hours ago

Awesome post, Harish! One question: the elasticity of meat will presumably change with income - do you think lower incomes as a result of the recession could be behind some of the decrease in demand? Harish 4 days, 20 hours ago

Ben, you are absolutely right that change in income can change demand just as well as a change in price can. In the case of meat, however, evidence suggests that reduced incomes due to the recession are unlikely to be a significant reason for the reduced demand for meat. Economists measure this relationship between income and demand using a different metric called the income elasticity of demand (as opposed to the price elasticity of demand). The studies that I have looked into suggest that the income elasticity of beef is close to zero and the income elasticities of other meats are negative. In fact, a recent (2010) meta-analysis of the income elasticity of meat, published in the Australian Journal of Agricultural and Resource Economics, confirms this. Higher income is correlated with reduced consumption of pork and poultry and more or less unchanged consumption in beef and fish. Some other studies based in the US have estimated even beef to have a negative income elasticity. This means that increased income does not actually increase consumption, or reduced income does not actually reduce consumption of these products (although changes in price may change consumption assuming no change in income). This is vaguely consistent with the fact that, in the richer countries like the US, higher income is correlated with increased consumption of fruits and vegetables. So, my guess is that lower incomes as a result of the recession are not a significant factor behind the decline in demand for meat in the US. But, we will know for sure only when the economy recovers fully. James 4 days, 5 hours ago

A problem is that the relevant information for animal advocates isn't "price versus non-price factors", it's "persistent versus impersistent factors". Most, but not all (e.g. tax), price factors are also impersistent so removing it helps. However, a lot of non-price factors are also impersistent. E.g. For the animal advocate, there's no relevant difference between a temporary fall in meat consumption because of a short burst of negative media attention and a temporary fall in meat consumption because of price volatility. However, there is a difference between both of these cases and a decrease in meat consumption because of an increasing number of veg*ns. Caryn Ginsberg, Animal Impact Super analysis, Harish! Question on the income elasticity studies that show no or even negative relationships between income and consumption. The research seems to look cross-sectionally at richer vs. poorer individuals (or countries). Maybe it makes sense that meat consumption goes down due to better education about and/or access to fruits, veg, grain, etc.. But the recession would appear to be a different effect, reducing incomes for individuals over time in a way that didn't necessarily change their core preferences. If someone loses a job, they didn't suddenly get more educated on health, fruit and veg, etc. Thoughts? I've wondered how much of the decline in per capita meat is, in fact, a budget issue in tough times. Good news is that the decline in chicken and beef that you show starting in 2007 would predate the recession. Thanks for this great piece. Harish 2 days, 19 hours ago 2 days, 20 hours ago

Caryn, As you say I suspect that part of the reason income elasticity of meat is negative is that higher income is correlated with better nutrition education and access to fruits and vegetables. But, I think the other and bigger reason is simply that fresh fruits and vegetables cost more than processed meat (a head of broccoli costs twice as much as a McDouble with two beef patties or a McChicken). So, when someone loses a job, they would save more money eating at McDonald's than eating fresh fruits and vegetables. I am not sure but I think this is a bigger reason why published studies show that the income elasticity of demand for meat tends to be
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zero or negative. So, that is why I think reduced income due to recession or tough times is not likely a substantive factor in this decline of meat consumption. As you note, some of the current decline predates the recession. Also, there was no decline outside of the larger pattern of changes during the 1991-92 recession either. While I think reduced income may not be a reason for the decline, price still is a factor. When prices rise above what people are used to paying, more people think it as overpriced and choose not to buy the item. For example, you are likely to balk at paying $10 per pencil even if you can afford to do so. ardeth 15 hours, 58 minutes ago

I'm wondering if the USDA took into account the current popularity of so-called free-range "organic" eggs and humanely raised meat animals from small farms. Is that included in the graphic information, Harish? Harish 9 hours, 38 minutes ago

ardeth, This post does not concern eggs. Regarding meat, the USDA food availability data is primarily based on production estimates made by the National Agricultural Statistics Service (NASS). According to the NASS, these estimates are based on a survey of "all known farms and ranches". Small farms are included in the list that forms the basis of the survey. Likely because of the large number of small farms, NASS says it uses a random sampling methodology in the survey of smaller farms. So, yes, small farms are included in the graphical data.

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