CALGARY, Alberta (RFD NEWS) — Walmart’s latest earnings report is offering insight into how consumers are responding to higher grocery prices, including elevated beef costs.
Shaun Haney, host of RealAg Radio, joined us on Thursday’s Market Day Report to discuss how retailers and consumers are beginning to adjust to the higher cost of beef as the U.S. cattle herd, which is at a 75-year low, and tight supplies continue to support cattle prices.
In his interview with RFD News, Haney says Walmart’s food business showed that consumers are not necessarily walking away from meat, but some are changing what they buy.
As beef prices have climbed roughly 9 percent to 13 percent, some shoppers are shifting toward pork and chicken, which remain more affordable sources of protein per gram.
Higher-income shoppers continue to purchase value-oriented beef cuts at retailers such as Walmart, while middle- and lower-income consumers are more likely to reduce package sizes or substitute ground beef for more expensive cuts.
Tight Cattle Supplies Continue to Support Prices
Despite questions about consumer demand, Haney says cattle supplies remain a major source of support for the market.
The national calf crop is down about 2%, adding to already-tight cattle inventories. Unlike poultry and pork, increasing beef production takes significantly more time and capital.
That means tight supplies can continue to provide a floor for cattle prices in the near term.
However, Haney says the bigger question for cattle producers is not whether the market is facing an oversupply, but how consumers respond to persistently high beef prices.
Packers Caught Between Producers and Retailers
The high-cost environment is also pressuring beef processors.
Haney says packers are caught between cattle producers demanding high prices because of tight supplies and large retailers with significant purchasing power that must manage consumer demand.
Recent moves by major processors to reduce slaughter capacity could also be an effort to bring the market closer to equilibrium and restore some leverage on the packing side.
Watch Grocery Promotions for Demand Signals
Haney says one of the best ways to gauge changing beef demand is to watch what major grocery retailers are promoting.
With Labor Day approaching, he says consumers should watch whether retailers are featuring beef and ground beef in their promotions.
Those deals can provide an early indication of what retailers believe will attract shoppers and whether consumers are becoming more price-sensitive.
For now, Haney says consumers continue to want beef, but they are increasingly looking for ways to get it at a price that fits their budgets.
