A monthly view of the North American beef industry with Steve Kay, Cattle Buyers Weekly, Petaluma, California.

Whether they are in Brisbane, Australia, or Brisbane, California (just south of San Francisco), consumers are the lifeblood of the beef industry.

The US industry in the 1980s and 1990s learned that it ignores the demand side of the market at its peril. It learned that all wealth to the industry flows from consumers and how much consumers spend on beef and the volume they buy determines whether demand improves or declines.

The industry is now digesting another lesson. It doesn’t matter how tight grainfed cattle supplies are or are going to be. Beef demand trumps supply.

Consumers don’t know or care about the supply side of the market. Their focus is on finding a beef item they can afford.

This seems pretty obvious, but if one looks at the way the US live (grainfed) cattle cash and futures market acted the first six weeks of this year, one might be excused for believing that many people for a while believed tight supplies would drive the market.

US live cattle prices last year put in a new weekly high of US$129.44 per cwt (equivalent to about A$2.50/kg) the last week of February. Expectations at the start of this January were that the market would easily exceed this record price. The February futures contract January 3 closed at $133.85 per cwt. The April contract closed at $137.32, the highest close of all contracts.

Such expectations by mid-February were shattered, as both contracts fell by about $8 and dragged cash prices down to $123. Both the futures and the cash market rallied the next two weeks due to severe snow storms in parts of the Midwest and Texas and disruptions in cattle marketings. But the rally is expected to be short-lived.

The market’s collapse was due to the fact that US beef demand at both retail and foodservice is weaker than expected. I began the year more sceptical than some as to how the market might perform. I was concerned that higher priced beef would prevent more consumers from buying beef at all. I was particularly concerned that an increase in federal payroll taxes from January 2 would reduce consumers’ discretionary incomes, i.e., the money they spend on food.

As January morphed into February, media stories appeared that Americans were getting smaller paychecks even if they had gotten their first wage increase in two or three years.

This set the alarm bells ringing in the head offices of every grocery chain and those restaurant chains that specialise in beef. Wholesale beef prices held up well through January but this meant retailers had few beef items to offer at a feature price.

Given there is a six-week lag between wholesale prices reaching the retail meat case, the lack of featuring really began to show up mid-to late February and will remain light in March.

Confirmation of a reduction in consumer income came last Friday from the US Bureau of Economic Analysis (BEA). It reported that personal income in January for all Americans fell $505.5 billion or 3.6pc from the month before.

Most of the decline was because disposable personal income (DPI) declined $491.4 billion or 4.0pc.

This huge loss of discretionary income is why US beef sales have struggled this year. Other factors include sharply higher prices for petrol and delays in Americans getting their federal tax refunds. Unemployment levels also remain high and new job growth remains slow.

March is the weakest demand month of the year for beef. This suggests the weather-induced rally in fed cattle and boxed beef prices might be short-lived and that prices will soon be under pressure again.

Meanwhile, retail beef prices are at all-time record highs. USDA’s January All Beef price averaged US$4.92 per lb (A$10.60/kg), up 6.3pc from a year earlier. Pork averaged $3.40, down 2.9pc, and chicken averaged $1.98, up 6.5pc. Beef was 45pc more expensive than pork and 2.5 times more expensive than chicken.

No wonder consumers continue to make their protein choices based on price-per-pound rather than relative value, as noted in the eighth annual Power of Meat study conducted by the meat and the supermarket industries.

Price continues to dominate the meat purchasing decisions of American shoppers, says the study. The No. 1 driver is price-per-pound, followed by total package cost, product appearance, nutritional content, preparation knowledge and preparation time and ease of preparation.

The study, which surveyed 1425 shoppers last December, also showed that sales and promotions drive purchasing decisions, in addition to meat coupons, ads and circulars and meat markdown, all of which are value related.

This confirms what I wrote about on Beef Central last month: that consumers are making protein choices more on price-per-pound than on relative value, and that they are “cherry-picking” retail features and special promotions as much as possible, especially in their beef purchases.

The beef complex faces two tough months until the spring grilling season begins.

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