A big question to be answered in the US beef market next year revolves around the price-point at which US consumers start to abandon their taste for beef, in what remains a heavily financially stressed consumer climate.

Several leading US market analysts and commentators have touched on the subject in recent days, and the issue has direct bearing on the financial performance of Australian grinding beef entering the US market over the next 12 to 18 months.

Cattle Buyers Weekly publisher Steve Kay made the point last week that after record high grainfed cattle prices in 2011 and early 2012, the past nine months has proven to be much tougher for US meat packers.

Cargill in its 2012 annual report released recently described the year to May as one of the toughest ever for the US beef industry.

Another major US packer, Tyson Beef’s results reveals the tough conditions as well. The company’s January-March quarter produced a $1 million loss versus a $94 million profit a year earlier.

Profits returned in the April-June quarter, with operating income of $71 million, representing 2pc of sales. But this was half of what Tyson earned a year earlier and it warns of reduced beef margins in 2013.

“JBS and other US packers are hoping for a better supply-demand balance to achieve positive operating margins this year and next, but this will become increasingly difficult,” Mr Kay said.

“US cattle numbers continue to decline and this year’s most widespread drought since the 1950s almost guarantees cattle supplies will not start to increase until 2015 at the earliest.”

Additionally, the US market over the past year had shown there is significant resistance to wholesale beef prices above a certain point (above $200 per hundredweight for the USDA Choice cutout).

Resistance was coming both from retailers, who had two other major protein choices to feature, and from consumers themselves.

Profitability for US packers and the entire beef industry in the coming year would depend on Americans’ willingness to pay even more for beef, Mr Kay said.

US meat protein consumption, production in decline

Making somewhat similar comments last week were analysts Steve Meyer and Len Steiner, writing in their Chicago Mercantile Exchange Daily Livestock report issued on Friday.

They make the point that the long-term trends in US meat and poultry production and consumption have shifted in the past few years, and more changes are in the offing.

The chart, published here which came from the Livestock Marketing Information Centre in Denver, tells an interesting story— and one that represents ‘economics in action’ for both producers and consumers.

It indicates that total US meat and poultry output peaked in 2008 (93.6 billion pounds, carcase/ready-to-cook weight).

Perhaps surprisingly, that output level has not fallen sharply with 2011 output coming in at 92.42 billion pounds and 2012 output forecast by LMIC to total 92.12 billion pounds.

“In spite of higher costs, US producers have pretty well maintained total production levels — until now,” Mr Meyer said.

LMIC’s forecasts for 2013 and 2014 are for total US meat and poultry output to be down 2pc from the 2012 level.

US per capita consumption of the four major species consumed in the US (beef pork, chicken, turkey) shows that while production has remained steady from the 2008 peak to last year, per capita consumption began falling in 2008 and continues to steadily decline.

If LMIC’s projections are correct, next year will mark the first time since 1990 that US citizens will consume less than 200 pounds (91kg) of total beef, pork, chicken and turkey annually, Mr Meyer said.

Bu why is the per capita consumption falling?

One obvious reason was the growth of US meat and poultry exports. The US pork, beef and chicken industries all set annual export records in 2012. A growing and, more importantly, increasingly affluent world population, especially in Asia, continues to draw more and more product out of the US market.

“US consumers will have to compete with buyers in other countries for these products,” Mr Meyer said.

Some people also argued that American tastes and preferences are just shifting against meat consumption.

These factors are important, and the second one will have a growing impact, it appears,” Mr Meyer said. “But we believe the real reason for the decline in US meat and poultry consumption is even simpler: Americans can’t afford as much meat and poultry as they once could.”

This inability was driven by reduced means as a result of the Great Recession and higher prices that have been driven by higher farm-level costs.

While US per capita real disposable income increased 10pc in the five years from 2003 to 2007, the five years since December 2007 has seen virtually no gain in the amount of money Americans have to spend. At the same time, costs for US meat protein producers have risen significantly.

The second chart shows that US consumers are willing to spend money on animal proteins.

“Would total expenditures be rising if people did not, in general, want to buy these products? We think not. It’s simply a matter of means and cost,” Mr Meyer said.