The Demand for Wholesale Beef Cutsby Season and Trend

Jerry C. Namken, Donald E. Farris and Oral Capps, Jr.

This study estimates demand during the 1980-90 period for wholesale beef cuts byseason and by trend. A data set containing monthly nominal prices for wholesale cutsand average choice boxed beef from January 1980 to December 1990 was collectedfrom multiple sources, The approach expressed the change in demand for wholedecuts as the change in the price ratio of individual cuts relative to the price of boxedbeef. This approach shows changes in amount by season and over time relative to theaverage wholesale cut. Brisket, Armbone Chuck, Bottom Gooseneck, and Knuckleshowed the strongest demand in winter and lowest in summer. Top (Inside) Round hada clear downward trend in demand, but the seasonal pattern was less pronounced andmore erratic than the lower-priced cuts. Top Sirloin Butt had ita highest demand inspring and summer with November-December being the loweat period. Strip Loin hadthe strongest warm season demand during the period which contains Memorial Day.Ribeye experienced a seasonal demand highest in November-December and lowest inJanuary to April. Full Tenderloin was the most expensive wholesale beef cut analyzedin the study, and its demand was highest in November-December. The study clearlyshowed that a change in seasonal demand was responsible for the major part of priceratio fluctuations for individual wholesale cuts.

Introduction

The general trend in the U.S. per capita red meatsupply for the 1980-90 period has been decliningwhile the trend in the per capita supply of poultry hasincreased. The most dramatic change is a 29.3pounds per capita increase in poultry, while beefsupply declined 8.8 pounds. Pork declined most inthe early 1980s, but for the 11 year period declined7.5 pounds (Figure 1).

These changes apparently have been driven bystructural changes in demand. Causes of changes indemand are generally understood but are not easy todocument, especially if the change in demand fordifferent segments of each of the red meat and poultryindustries is considered. There is a general indicationthat the growth in demand is for those cuts of meat,poultry, and fish products with higher quality, moreconvenience, and less fat.

Within these general trends, there is considerablevariation in demand and supplies by season. Duringthe 1980-90 period changes in beef supplies were

Agricultural ez.onomist,USDA, RDA, Cooperative Ser-vices; Professor, Depmtmcnt of Agricultural Economics,

Texas A&M University; Professor, Department of Agri-cultural Beonomics, Texas A&M University.

Journalof FoodDktribution Rewwch

mostly seasonal with a decline in total beef occurringthe last four years of the period. Most of this declinewas due to a decline in cow slaughter which resultedin a drop in non-fed beef supplies, Most of the fluctu-ation in the steer and heifer beef supply was seasonal(Figure 2)0

Objectives

The objective of this study is to estimate changes indemand for different types of wholesale beef cuts asinfluenced by quality, convenience, and season duringthe 1980-90 period. Specific objectives are:

1.

2.3.

Refine ‘the e@irn_&esof &md and season indemand using bimontldy and monthly periods forspecific wholesale cuts relative to average USDAchoice boxed beef.Compare alternative estimating models.Elaborate the rationale for using price ratios ofindividual wholesale cuts to avemge boxed beef

(~ composite) to avoid problems commonto using deflated price time series.

Previous Research

Most of the meat demand studies have dealt withaverage retail price data for the commodities of Iwef,pork, and chicken (Punk, Meilke and Huff 1977,

Septamber 941page 47

85

80

75

70

3s 65

&

60

55

50

45 1 1 I I 1 1 1 I 1 I 1------ --

lYW 81 82 83 84 85 86 87 88 89 90Years

= Beef A Pork = Poultry

Figure 1. Per Capita Disappearance of Beef, Pork, and Poultry From 1980-90

(Retail Weight Baais - Pounds). Source: U.S. Department of Agriculture,

.-80 81 82 83 84 85 86 87 88 89 90

Monthly Periods, 1980-90.

---- Steer md Heifer Beef . Non - Fed B~f — Total Beef

Figure 2. Comparison of Per Capita Supply of U.S. Beef (Carcass Weight).

September 941page 48 Jourrd of Food Dktribution Renearch

Marion and Walker 1978, Capps 1989). Few existingstudies disaggregate beef demand into demand forindividual wholesale cuts.

Procopio used a weekly price index to examineseasonal differences in three wholesale cuts of meatfor the period 1985-89. The cookout season resultedin a Memorial Day period price peak of 18 percentabove the annual average for boneless strip loins, anda peak of 16 percent for pork spareribs. Boneless armchuck, which produces mostly roasta, and groundbeef, had highest prices during the winter months.

Capps et al. used multivariate analyses to developflexibilities related to wholesale beef cuts. Whereprice, lagged one month, was used as an independentvariable, short-run own flexibilities varied from-.0319for non-fed beef (meaning that it is very price sensi-tive to changes in supply) to 50 percent Lean Trim-mings at -.9S36 (the least sensitive to supply changes).Fifty percent Lean Trimmings was followed by otherlower priced cuts in order of value (Brisket, -.56,Chuck, -.38). Most of the higher valued cuts werejust under -1.0 with Tenderloin, the most expensivecut, at -.29. Pork and chicken had lower own flexibil-ities at -.26 and -.41 respectively. Few of the cutshad significant beef-cut cross flexibilitiea, indicatingtheir prices were more sensitive to their owmsupplies.

After explaining the theoretic basis for the ratioapproach, Farris and Holloway (1990) ahowed that achange in the ratio of the price of a wholesale cut tothe average wholesale price of the carcass compositewas evidence of a trend in the demand for that cutrelative to all fed beef. They provided estimates ofdifferent aawonal effects of wholesale and retail cutsrelative to all fed beef. Using USDA, AMS data from1980 through 1989, they estimated trend and seasonalcoefficients (three month averages, i.e., December,January, and Februmy prices were averaged to repre-sent winter) for 12 wholesale cuts, including 50 per-cent and 85 percent Lean Trimmings. Adjusted R2values ranged from .20 to .90 with Durbin-Wataon@w) values ranging from .61 and 2.33, howevermost DW valuea were close to 1.0. This providedunbiased parameter estimates, but standard errors werenot reliable.

Methodology

This analysis used the same basic approach as Farnsand Holloway (1990) except monthly and bimonthlyseasonal effects were measured instead of 3 monthseasonal estimates. Jn addition, the dependent priceratio was lagged and used as an independent variablefor a comparison.

A monthly price ratio of 12 individual wholesalecuts to the Boxed Beef carcass composite provided the

dependant variables for the general model. Indepen-dent variables were relative demand, time trend, andbimonthly seasonal effects in the first model. In thesecond model, the price ratio variable was lagged onemonth and added as an independent variable to reduceunexplained error. The third model differed with theseasonal variables changed from bimonthly tomonthly.

The rationale for using a price ratio dependantvariable is that the nominal price of USDA choiceboxed beef embodies the demand and supply influenceof the current beef market and the influence of substi-tutes. The nominal price of the individual wholesalecut is influenced by the level of boxed beef and thedifference in the demand for the individual cut fromthe average cut. The monthly price ratio then repre-sents the change in the price of an individual cutrelative to the average choice beef cut. Since quantityof the cut is a fixed proportion of the quantity ofboxed beef, the change in the price ratio represents achange in the relative demand of the individual cut.

The trend in demand for the individual cut rela-tive to Boxed Beef average is measured by a trendvariable where January 1980 is 1.0, February 1980 is1.1 and December 1990 is 14.1. The demand differ-ence from Boxed Beef due to monthly and bimonthlyperiods is expressed by dummy variables as deviationsfrom a base period.

The hypotheses are:1. The trend in demand for higher valued cuts is

increasing during the 1980 to 1990 period.2. The demand for wholesale cuts that are used

more for steak when outaide grilling is greaterduring warm weather than cold weathe~whereas, the demand for whok.sale cuts thatproduce mostly roasts is greater during the coldmonths.The specifications for the first model are:

P~ = a + &TM + 82 Jan-Febi + & Mar-Apri+P, May-J~ + & Jul- Augi + & Sep-Octi+ fi, Nov-Deci

where bimonthly perioda are dummy variablesexpressed as deviationa from Nov-Deci, and whereP&t = Price Ratio of Cuti, = (nominal price of cuti,/Boxed Beef Prier+).

The second model includes lagged price ratio asan independent variable and becomes:

P%, = CY+ /31P&.l + & Tt + & Jan-Feb~ +. ..+ & Nov-Deci

where bimonthly periods are dummy variableexpressed as deviations from Nov-Decl.

Journal of Food Dkibution Resewh September 941page 49

The third model is expressed by:

and where PI$,.l = Price Ratio of Cutit = (nominalpli~ of cut~,/BoxedBeef PriceJ

PRi,.,= lagged Price Ratio of cuti

T, = monthly or bimonthly period where T1 =January 1980 = 1.0 and Tz = February 1980= 1.1 .,. Tln = December 1990 = 14.1

Jai+ . .Deci = monthly dummy variables

Jan-Febi.. .Nov-Deci = bimonthly dummy variables.

Wholesale Price Data

A data set containing nominal prices for wholesalecuts of beef from January 1980 to December 1990 wascollected from multiple sources, Prices for all cutsfrom January 1980 to December 1981 and for FullTenderloin, and Flank Steak from January 1982through December 1990 were obtained from PriceAnalysis Systems (1990, 1991). Price information forRibeye, Brisket, Armbone Chuck, Knuckle, TopInside Round, Bottom Gooseneck, Strip Loin, and TopSirloin Butt from January 1982 through December1990 were taken from USDA, AMS Central CarlotMeat Trade sheets. Prices for 50% Lean Trimmings,90% Lean Trimmings, and Boxed Beef Cut-out wereobtained from Mike Sands (1980-89). 1990 prices forthese three items were obtained from Carlot MeatTrade sheets.

Wholesale quantity data were not directly used inthis study except to show monthly per capita produc-tion of beef (Figure 2). This approach assumes thattotal U.S. beef supply and demand is embodied in theaverage monthly price of wholesale boxed beef. Sinceindividual wholesale cuts are produced in a relativelyconstant proportion to wholesale boxed beef, this ratio(price of wholesale cuts to the price of wholesaleboxed bed) is expected to reflect the demand forwholesale cut i for time period t relative to averagebox beef at the same time and place.

The detailed results from this monthly wholesalemodel are in Appendix Table 1. This table providesestimates of monthly shifts in demand and trends indemand with acceptable statistical measures for mostcuts. The monthly detail requires more study tounderstand this table, however. To improve stability,clarity, and ease of presentation, the dummy variableswere converted to bimonthly periods by combiningJanuary-February, March-April . . . November-December. These estimates are deviations from the

November-December average. This model was esti-mated with and without the Price Ratio lagged oneperiod. Most of the following discussion is of themodel results with lagged Price Ratio omitted.

Results

The demand for individual wholesale cuts of beefvaries mostly by season; however, there has beendramatic trends in demand for all beef as well asunique trends for specific beef cuts. The generaltrend in steer and heifer beef supplies was remarkablystable during the 11 year period of 1980 through1990. The primary variation in per capita supplies ofbeef have been seasonal (Figure 2).

Both fed beef and non-fed beef experience erraticshort-term changes in supplies. Generally, monthlysupplies varied in a range of 95 percent to 105 percentof the 1980-90 average. Supplies averaged lowest inMarch and highest in Gctober (Figure 3), Thesemonths were adjusted for a constant number of daysper month (30.4) (otherwise February, with threefewer days than March, would show the lowedmonthly supply).

Although annual per capita supply changed verylittle during the 1980-90 period, short term supplychanges often percent, plus seasonal demand changes,resulted in considerable short-term price variability inwholesale cuts of beef. Despite these rather stableannual supplies during the 1980s, the real (deflated)price trend declined rather sharply from 1980 to 1986(Figure 4),

Demand by Season and Trend

Beginning with the lowest priced wholesale cuts,seasonal demand patterns and trends are illustrated inFigure 5, Packer-style Brisket showed the strongestdemand in winter and lowest in summer, In the early1980s, it was priced above the average for wholesalechoice boxed beef, but by the last half of the 1980s itsprice averaged below that level (indicated by a priceratio below 1.0), The sharp increase in demand forBrisket in winter apparently depended on demand forcorned beef, as well as roasts in winter.

Summer demand is supported by outdoor smo-king and grilling, especially in the Southwest. Packerstyle brisket is often sold by food retailers in theSouthwest as a “loss-leader. ” The trend in demandover time for Brisket (as was the case for most of thelower priced cuts) was clearly downward relative toall fed beef (Figure 5). The statistical results of theseanalyses are pre-sented in Table 1. Despite the medi-ocre statistical measurement, these graphics show aremarkably good fit between the observed and pre-

September 94/page 50 Journel of Foort Dktnbution Reaearvh

108,

106

92

d 1 1 1 1 1 I t 1 I 1 1 1

Jan Feb Mar Apr May lun Jul Aug Sep oct Nov Dec1980-90 Averagefor Each Month.

— US. Beef Supplyby Month ---- Adjustedfor ConstantDays per Month

Figure 3. U.S. Beef Supply by Months and by Constant Days per Month,as a Percent of 1980-90 Average.

150

140

so v

Monthly Periods, 1980-90.

Figure 4.

JOUKIMIof Food Distribution Reacarch

Monthly Price for Boxed Beef Cut-Out, 1980-90, Deflated byCPI, 1982-84 = 100.

Scpternbor 94/page 51

120 Brisket

1.2 , I

0,880 82

Siiallhly PeriO&,19s3 -m.

1.6

.2 1.4

2

g 1.2

1

-- Pmdicted-Actd

170 Bouom Gooseneck

Biimthly Peri0d8,19S0-W.

-- t%edicted-Achtd

168 Top (Inside Round)

‘“8 ~

.; 1.6

&

.j ,.4

1.2

BmmIhlyPeriods,19W3-90.

-- Pmdicled-Aclual

1.2

0.-

2$1

.C&

0.8

1.6

0.-

! 1.4v.=&

1.2

2.4

2.2

g,.:

~ 1.6

1.4

1.2

126 Armbone Chuck

1 1

~Bmdhiy Period 19S0-90.

-– Prdictd-AcO.nl

167 Knuckle

80Bmcdhly Period,19MI-50.

-—Predicted— Add

184 Sirloin Butt

BmmthlyPeriods, 19S) -m.

-- Pdided-Aciud

Figure 5. Seasonal Demand and Demand Trend Relative to Boxed Beef Cut-OutFor Selected Cuts of Wholesale Beef, 1980-90.

September 941page 52 Journal of Food Dktribution Researeh

Table 1Price ratio of wholesale beef cuts, trend/bimonthly model, 1980-90

MEAN INTER- JAN- MAR- MAY- JUL- SEP- ADJITEM RATIO’ CEIW TREND PEBb APRb JUNb AUGb OC~ R2 DW

FRESH 50%,TRIMMINGS

120,BRISKET

126,ARMBONECHUCK

FRESH 90%TRIMMINGS

170,BOTI’OMGOOSENECK

167,KNUCKLE

168,TOP (INSIDE)ROUND

184,TOP SIRLOINBUT1’

193,FLANKSTEAK

180,STRIP LOIN

112A,RIBEYE

189,PULLTENDERLOIN

.0382(1.98)

.0014(.071)

.16

.58

.65

.09

.81

.58

.59

.79

.14

.55

.44

.54

.46

.89

.58

.46

1.04

.88

1.33

1.57

.84

.88

.79

.47

.48

.98

1.00

1.07

1.27

1.41

1.48

1.84

2.55

2.66

3.22

3.37

.5288(29.42y

-.0069(-4.69)

-.0164(-.85)

.0022(.12)

-.00007(-.004)

-.0273(-2.34)

.0592(2.64)

-.0642(-4.32)

-.0173(-1.41)

.0240(1,47)

.2757(8.39)

.0727(1.03)

.1922(3.48)

-.2823(-5.59)

-.1469(-2.24)

.0082(,42)

-,0959(-5.56)

-.0832(-7.15)

-.0038(-.i7)

-.1678(-11.31)

-.0363(-2.95)

.0564(3.33)

.5005(15.24)

.0272(1.03)

.5261(9.54)

-.1966(-3.90)

-.0704(-1.08)

1.0977(68.10)

-.0115(-8.74)

.0390(2.26)

-.0932(-5.41)

-.0627(-3.64)

1.0871(100.00)

-.0091(-10,33)

.0327(2.80)

-.0523(-4.50)

.0150(1.29)

1.0712(51.18)

-.0033(-1.95)

.0581(2.59)

.0278(1.24)

.0216(.97)

1.4858(107.17)

-.0183(-16.26)

.0053(.36)

-.1751(-11.81)

-.0350(-2.36)

1.5069(131.17)

-.0097(-10.41)

.0285(2.31)

-.0693(-5,64)

-.0124(-1,01)

1.6022(101.32)

-.0166(-12.90)

-.0229(-1.35)

-.0075(-.45)

-.0060(-.36)

1.8342(59.77)

-.0310(-12.40)

.1045(3.18)

.4090(12.46)

.1515(4.62)

2.5588(38.49)

.0074(1.37)

-.0281(-.40)

-.2402(.38)

.1267(-3,39)

2.4358(47.26)

.0011(.26)

-.0335(-.61)

.4159(7.54)

.172s(3.13)

-.1903(-3.77)

-.2547(-3.89)

3.2112(68.09)

.0260 -.3321(-6.57)

-.1164(-2.31)(6.79)

3.0510(49.89)

.0585(11.76)

-.1942(-2.96)

-.1316(-2.01)

‘ Average monthly wholesale price of cut / average monthly price of Boxed Beef composite price.b Deviation from Nov-Dec.“ t - valuea in parentheaea.

Journal of Fo06 Dhtribution Research September 94/page 53

dieted results of many of the cuts without using pricelagged as an independent variable.

These analyses were simplified by using the ratioapproach. The demand equation is simply: PriceRatio depends on a constant, plus a trend, and onbimonthly periods. November-December was selectedas a base so that all bimonthly variations were devia-tions from the November-December averages. ForBrisket, the demand in all bimonthly periods exceptJanuary-February were lower than November-December (Figure 6). This was statistically significantfor all periods except March-April.

Armbone Chuck followed the same general pricepattern as Brisket with demand clearly stronger inwinter than summer and the same downward trend indemand relative to Boxed Beef Cut-Out (Figures 5 and6). The mean price ratio for the period was onlyslightly higher than Brisket and about the same levelas Boxed Beef Cut-Out producing a price ratio of 1.0(Table 1).

Tables 1 and 2 differ in that Table 2 includes alagged price variable which provided a better fit andimproved statistical tests, The R-squared values werehigher and the Durbin h values were acceptable exceptfor Brisket and Top Round. These results indicatethere is no significant serial correlation except forthose two wholesale cuts. Lagged price interacted,however, with the trend and seasonal effects andtended to reduce or distort these estimates. Themethod used in Table 1 provided unbiased results forseason and trend,

Bottom Gooseneck had essentially the sameseasonal and trend pattern as the previous two cuts.These cuts take longer to prepare and generally mustbe baked or used for ground beef. The estimatedseasonal pattern was very close to the actual (R2 =.81) and this pattern was quite consistent throughoutthe 11 years. The downward demand trend was evenmore pronounced than Brisket and Armbone Chuck (-.018 compared to Brisket at -.011 and ArmboneChuck at -.009, Table 1).

Knuckle had a clear downward trend in demandrelative to all choice fed beef with seasonal demandhigher in winter and lower in summer. This patternwas much the same for the preceding cuts but moreerratic (Figure 5). Like previous cuts used mostly forroasts, the demand was highest from Novemberthrough February (Table 1).

Top (Inside) Round had a clear downward trendin demand, but the seasonal pattern was less pro-nounced and more erratic than the lower priced cutspreviously discussed. Clearly, all of the cuts dis-cussed above ned to be considered for alternativevalue-added uses to reverse downward trends in theirvalue.

Top Sirloin Butt averaged about twice the valueof Boxed Beef Cut-Out early in the period, but itssignificant downward trend resulted in an averageratio of 1.84 for the 11 year period (Table 1). Thiscut clezwlyhad its highest demand in spring and sum-mer with November-December being the lowest peri-od. The seasonal pattern was surprisingly pronouncedand regular (Figures 5 and 6).

During the 1980s, Flank Steak became popularfor beef fajitas. The demand trend increased relativeto Box Beef Cut-Out during the mid-1980s, butdropped back toward the end of the 1980s as Brisket,Chicken Breast, and other cuts of beef began to beused more for fajitas as well. The net demand trendis slightly positive during the 1980s, but not signifi-cantly different from zero for the entire period.Demand is somewhat erratic and appears to be thelowest in mid-summer, when it is hot in the Southwest(Table 1 and Figures 7 and 8).

As the analysis moves up the value scale to FlankSteak and Strip Loin the demand trend neared that ofBoxed Beef Cut-Out. The strongest warm seasondemand for strip steaks during the year is the periodwhich contains Memorial Day (I%ocopio). ApparentlyMemorial Day is the first big cookout week-end formany in the Northern States. May to August areclearly the periods of strongest relative demand forStrip steaks (May-June = .53, July-August = .42compared to November-December = O, Table 1 andFigure 7).

Ribeye clearly experienced an increasing demandtrend during the 1980’s period at a price ratio increaseof 0.026 per month (Table 1 and Figure 7). Seasonaldemand was erratic, but its highest relative price wasin November-December and lowest in January toApril. This cut had an average value of 3.22 timesthat of the Boxed Beef Cut-Out. It is a popular itemin the reWmrant trade as well as in the retail storetrade (Table 1).

Full Tenderloin was the most expensive whole-sale beef cut analyzed in the study at 3.37 times thatof Boxed Beef Cut-Out. It had a strong increaae indemand during the 1990s at a $0.0585 (Table 1 andFigure 7). Being tender and lean, this cut is also afavorite restaurant item. Like ribeye, relative demandwas highat in November-December (Figure 8).Seasonal demand was also erratic, and it appeared tobe sensitive to economic conditions (as indicated bylower than average prices in the recession of the early1980s and higher relative prices in the rnid-1980’s).Its demand may be related to business variations in thefine restaurant business,

The above analyses provides unbiased estimatesof the trend in demand and changes in seasonaldemand relative to all choice been however, the statis-tical properties in Table 1, as indicated by low DW

September 941page 54 Journal of Food Dhribution Research

-0.4Jmtwss hMR-APR MAY-JUN JUL-AUO SW-cm

120 Brisket126 Ardme Chuck

I. 0.6{

~ 0.4-

EL 0.2-.S.$

3°

i:~JAN-FEB W-MR MY-JUN JUL-AUO sEP-OCT

0.6

-0.4

170BoaontGooseneck

JAN-PES MAR-APR MAY-JUN JUJ..AUO Bsimc’T

168Top Rowi

JAN-PEs MAR.APR MY-JUN JUL-AUO STP-OCI

0.6167 KnuekJe

JAN-FSB MAR-APR hWYJUN JULAUO S6P-ocr

1S4Sidoii Bua

JAN.F6S MM-APR MYJUN JUbAUO SSP-OCT

Figure 6. Seasonal Changes in Demand for Wholesale Cuts Relative to November-December,1980-90. Price Ratio = Bimonthly Wholesale Price of Cut /Average BimonthlyWholesale Price of Beef.

Joumel of Food Dhribution Reeemvh

Table 2Price ratio of wholesale beef cuts, lagged and trend/seasonal model, 1980-90.

MEAN INTER LAG JAN- MAR- MAY- JUL- SEP- ADJrrm RATIO -CEFf PRICE TREND FEBb APRb JUNb AUGb @ R2 Dh

FRESH 50%TRIMMJNGS

120,BRJSKJ7f

126,ARMBONECHUCK

FRESH 90%TRJMMJNGS

170,BOTI’OMGOOSENECK

167,KNUCKLE

168,TOP (INSIDE)ROUND

184,TOP SIRLOINBUIT

193,FLANKSTEAK

180,STRIP LOIN

112A,RIBEYE

189,FULLTENDERLOIN

.48

.98

1.03

1.07

1.27

1.41

1.48

1.84

2.55

2.66

3.22

3.37

.110(3.52~

.793(14.31)

-.001(-1.34)

-.003(-.23)

.006(.47)

-.003(-.22)

.025(2.09)

-.027(2.28)

.68 1.13

.75 -2.20

.84 -1.29

.67 0.66

.90 0.29

.68 1.62

.64 2.96

.84 -0.70

.42 0.93

.73 1.06

.62 1.16

.83 1.63

.40(5.36)

.65(9.42)

-.004(-2.95)

.007(.55)

-.038(-2.76)

-.081(-6.05)

-.035(-2.37)

-.035(-2.60)

.689(12.74)

-.003(-3.47)

.033(4.29)

-.023(-3.04)

-.030(-3.37)

.0Q9(.94)

.039(4.87)

.326(5.42)

.210(3.59)

.796(15.00)

-.0002(-.16)

-007(-.4.64)

.038(2.86)

-.003(-.23)

-.011(-.83)

.024(1.82)

.0002(.01)

.527(5.72)

.647(10.48)

.00003(.0029)

-.051(-4.68)

-.099(-7.78)

-.052(-3.28)

.030(2.39)

.749(6.73)

.505(6.85)

-.005(4.53)

.0121.11

-.017(-1.64)

-.027(-2.58)

-.042(-3.70)

.007(.61)

1.015(7.33)

.367(4.26)

-.010(-5.61)

-.026(-1.59)

.031(1.93)

.031(1.81)

-.012(-.77)

-.004(-.28)

1.087(7.49)

.398(5.30)

-.019(-6.01)

.134(4.53)

.220(7.13)

.358(9.04)

.243(5.69)

.060(1.78)

1.10(5.67)

.58(7.80)

.003(.66)

-.054(-.91)

.054(.92)

-.051(-.86)

-.166(-2.82)

-,029(-.50)

.865(5.08)

.625(9.47)

.0006(.19)

.047(1.07)

.194(4.59)

.340(7.29)

.144(2.83)

.037(.836)

1.471(6.66)

.554(8.00)

.012(3.20)

-.274(-6.48)

-.155(-3.51)

-.073(-1.66)

-.0950(-2.3)

-.117(-2.77)

.724(4.55)

.798(15.01)

.012(2.80)

-.257(4.43)

-.085(-2.16)

-.074(-1.89)

-.197(4.99)

-.168(4.24)

‘ Average monthly wholesale price of cut / average monthly price of Boxed Beef compmxte price.b Deviation from Nov-Dec.“ t - values in parentheses.

September 941page 56 Journal of Food Dktribution Research

193 Flnnk Steak

3’2 ~

180 Strip Loin3.4 I I

3 3.2

.22.8

z

03.-

2,6 f 2.8

~ 2.4 $2.6

2.2 2.4

-- Prdkled-Aci IEI

2.280

Biidlly PA&, 19s0- m

-- Pmdidd-Actud

112A Ribeyes3.8

3.6 4

.23.4~ 3.8..-

A 3.2~ 3.6

.$3.4

43 d 3.2

2.8 .13,

2.6

siialtldy Periab, 19s0 -90.

-- Pdicted-Acbd

189 Full Tenderloin4.2, #

BmmlhtyPeriod,,19m-w.

-- Prdcted-Adud

Figure 7. Seasonal Demand and Demand Trend Relative to Boxed Beef Cut-Out for SelectedCuts of Wholesale Beef, 1980-90.

Journal of Food Dkribution Reaeareh September 94/page 57

193 FkmkSteak

l’i----0.4J

JM-FEB ~-AYR hMY-JUN JUL-AUG SEP-ocr

Ilu Rii

MN-F6S JUAR-AFR tAAWJUN JUL-AUO SEF.0C7

180 Srriploin

0.6,

-()#~ ~MAY-JUN JULAUCJ SEP-OCT

189 Full Tenderloin

JAN-FEB W-APR MYJUN JUL.AUO SiiP-OCT

Figure 8. Seasonal Changes in Demand for Wholesale Cuts Relative to November-December,1980-90. Price Ratio = Bimonthly Wholesale Price of Cut /Average BimonthlyWholesale Price of Beef.

September 941page 58 Journal of Food Dktribution Research

values and relatively low adjusted R2 values, areweak. If the price ratio, lagged one period, is consid-ered in the analyses, the R2 are substantiallyimproved. However, the lagged price ratio, by itsnature, interacts with the trend and seasonal variablesand generally reduces the trend effect and part of theseasonal effect (Table 1). The authors’ judgement isthat the more simple model used in Table 1 providesthe best estimate of the trend and seasonal parametem.

Conclusion And Recommendations

This approach to beef demand analysis isolates thedemand trend and the seasonal demand of individualcuts by removing the overall variation in total beefsupply and demand from the analysis. This was doneby dividing the monthly price of each wholesale cut bythe monthly Boxed Beef Cut-Out price. For most ofthe wholesale cuts, the seasonal effects and time trendin demand tracked the actual data (Figures 5 and 7).This study, as well as the previous study by Farns andHolloway, did not tind a unique direct relationship topork or to other individualwholesalecuts of beef.Theoryand observation in the market suggest that asubstitute relation exists, but the seasonal demandchanges appear to be so strong they apparently maskthe influence of other factors. This lack of findingsubstitution effects among beef cuts, as well as porksubstitutes, suggests that in the very short run theremay be little substitution effect, or that it occurswithin the period of aggregation and therefore doesnot show up in weddy average prices. Most cutsshowed a significant substitute relationship withchicken, however.

The graphs clearly show that a change in sea-sonal demand is reqonsible for the major part of priceratio fluctuations, because changes in the overallsupply of beef on the subprimal price is removed bydividing the wholesale cut price by the Boxed BeefCut-Out price. The supply of an individual cut is tiedto the total supply of beet therefore, when seasonaldemand for that cut changes, it directly changes itsprice and its price ratio to Boxed Beef Cut-Out.

Since the lower valued cuts had a declining trendrelative to all beef during the 11 year period, it isclear that there has been a trend toward decreaseddemand for lower quality cuts. The increased trend inthe price ratio for higher valued cuts show a growingdemand for quality. It appears there is an impliedincrease in the demand for convenience. Cuts that areused most for roasts had a declining relative demandwhile those cuts from the same primal or sub-primal,and used mostly for steaks, had a growing demsndrelative to all beef. Clearly the middle meats (StripLoin, Ribeye, Tenderloin, and Top Sirloin Butt) of fed

cattle are responsible for a greater percentage of thevalue of the live animal as compared to a decade ago.

References

Cspps, Oral Jr. “Utilizing Scanner Data to EstimateRetail Demand Functions for Meat Products. ”Amer. .1. Agr. Econ. 71(1989):750-60.

Capps, Oral Jr., D. E. Farns, P. J. Byrne, J. C.Namken, and C. D. bmbert. “Determinants ofWholesale Beef Cut Prices. ” Selected paperpresented at the American AgriculturalEconomics Association, Baltimore, August,1992.

Eales, James S. and L. J. Unnevehr. “Demand forBeef and Chicken Products: Separability andStructural Change. ” Amer. J. Agr. Econ.70(1988):521-32,

Farns, Donald E. and D.W. Hollaway. “DemandTrends for Beef Cuts - by Quality, Convenience,and Season. ” American Agricultural EconomicsAssociation. Selected Paper Presented August 6-8, Vancouver, Canada. 1990.

Farris, Donald E., J. C. Namken, and O. Capps, Jr.“Demand for Beef Cuts at Retail and Wholesaleby Season and Trend” Part II, contract report tothe National Cattlemen’s Association, June 1,1992.

Funk, T. F., K. D. Meilke, and H. B, Huff. “Effectsof Retail Pricing and Advertising on Fresh BeefSales. ” Amer. J. Agr. Econ. 59(1977):533-37.

Ginzel, John. USDA, ERS data set by personalcorreapndence.

Holloway, David W. “Trends in Demand for Retailand Wholesale Cuts of Meat. ” MS. Thesis.Agricultural Economics, TexaaA&M University,December, 1990.

Jeaaie, W. B. USDA, ERS data set by personalcorrespondence, 1991.

Marion, B. W. and F. E. Walker. “Short-Run Pre-dictive Models for Meat Sales. ” Amer. J. Agr.Econ. 60(1978):667-73.

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Journal of Food Dktribution Reaeareh September 941page 59

Nelson, Kenneth E., L. A. Duewer, and T. L.Crawford. ‘Reevaluation of the Beef Carcass-to-Retail Weight Conversion Factor. ” CommodityEconomics Division, Economic Research Ser-vice, USDA Agricultural Economic Repon No.623.1989. p. 28.

Price Analysis Systems. “Meat Price Relationships. ”Memphis, TN 1990 Edition.

. “Meat Price Relationships. ”Memphis, TN 1991 Edition.

Procopio, Mary. “Seasonal Index Can Help PredictPrice Variations. ” The National Provisioner.(June 2S, 1990):18-19.

Sands, Mike. Data set by personal correspondence.

USDA, Agricultural Marketing Service. “WholesaleMeat Quotation. Centml U.S. Carlot MeatTrade. ” Des Moines, IA.

USDA, Economic Research Service. “Livestock andMeat Statistics, 1984-88.’ Table 140.Washington, DC.

Uvacek, Edward, Jr, An Econometric Analysis andForecasting Model for Beef, Dissertation.Department of Agricultural Economics, TexasA&M University, College Station, TX 77843.January, 1967.

Weimar, Mark, R,, and S. Cromer. “Egg and Poul-try Statistical Series, 1960-89. w USDA, Eco-nomic Research Service. Statistical Bulletin No,816. Washington, DC. September, 1990,

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