April 24, 2017
Economics Group
Special Commentary
Eugenio J. Alemán, Senior Economist
[email protected] ● (704) 410-3273
Eat More Chicken, Beef, Pork, and Fish
Executive Summary
The industry battle that continues to be fought in the fast food industry between those fast food
chains that sell chicken versus those that sell beef (i.e., recall the Chick-fil-A advertising
campaign, “eat more chicken,” which demonstrates this strong rivalry competitive relationship
between chicken consumption and beef consumption within the fast food industry.) That is,
chicken and beef are substitutes in consumption. However, the story is very different for
American households eating food “purchased for off-premises consumption,” that is, buying food
for eating at home. According to our analysis, U.S. beef suppliers should be concerned only with
the market for pork; they should be very conscious about pork prices. However, changes in the
price of poultry, fish, or other meats do not affect the consumption of beef in the United States.
During the past several years, it is clear that what is good for one type of meat is good for the
other. Although someone might choose between a chicken fast food franchise and one that sells
beef, the truth is that for household consumption, increasing meat consumption has lifted all
industry participants. This is probably not surprising. If you barbecue at home, you normally use
several types of meat: beef, pork, poultry, etc. Thus, your meat choice is not constrained by
whether you are at a chicken fast food store or at a beef fast food store. Furthermore, nowadays
you can often eat chicken or beef at either of these fast food chains. What is different from
cooking food at home is that there is no limit to what you can serve; you can have them all.
Hence, our analysis: although there is a relatively strong substitution effect in the consumption of
beef and pork when eating at home, there is little response from American consumers to the
consumption of beef if the price of poultry, fish, or other meats, changes. In this report, we
examine the relationship between these different types of meats and try to identify the patterns
present in U.S. consumption.
Strong Increase in U.S. Meat Consumption
Lower meat and poultry prices in the United States during the past several years have helped
push meat and poultry consumption at homes to an all-time high for most of the different meats,
with the sole exception of beef. The decline in meat and poultry prices since early 2015, about
6.4 percent (Figure 2), does not seem to be related to an economic recession or excessive
weakness in the economy, due to the economic cycle, but rather to more structural issues within
the meat and poultry industries. 1
Within the meat and poultry category, the consumption of poultry, pork, fish and other meats is
at an all-time high today (Figure 3). As mentioned above, the exception has been beef and veal
consumption, both of which had been trending down over the past several decades and are now
starting to recover. Furthermore, as we state in the next section and in Figure 3, some of the beef
market seems to have been pressured by the consumption of other types of meats and poultry.
However, our econometric analysis shows that competitive pressure appears to come from the
consumption of pork and not from other types of meats.
1 An analysis of the reasons for this “structural,” rather than cyclical, change in the pricing of meat and
poultry is beyond the scope of this report.
This report is available on wellsfargo.com/economics and on Bloomberg WFRE.
For household
consumption,
increasing meat
consumption
has lifted all
industry
participants.
Eat More Chicken, Beef, Pork, and Fish
April 24, 2017
WELLS FARGO SECURITIES
ECONOMICS GROUP
Figure 1
Figure 2
Total Meat and Poultry Consumption
Meat & Poultry Prices
In Billion of Dollars
Index; 2009=100
$140
$140
$135
$135
$130
$130
$125
$125
$120
$120
$115
$115
140
140
130
130
120
120
110
110
100
100
90
90
80
80
70
70
Meat and Poultry: Feb @ $137.6 Billion
$110
99
01
03
05
07
09
Meats and Poultry: Feb @ 118.4
11
13
15
17
$110
60
99
01
03
05
07
09
11
13
15
17
60
Source: U.S. Department of Commerce and Wells Fargo Securities
To understand what has happened to meat and poultry prices over the past several decades, we
can point to the increase in prices since 1999 until today for the different type of meats and
poultry (Figure 4). For example, beef prices in February of this year were up 114 percent
compared to January 1999 while poultry prices rose “only” 44.1 percent, pork prices were up
46.2 percent, other meats prices were up 50.1 percent and fish prices grew 59.4 percent, all during
the same period. Furthermore, if we look at the peak increase in beef prices, which occurred in
February 2015, beef prices were up 138 percent compared to February 1999. That is, today’s beef
prices are down 10 percent from the peak seen in February 2015.
Where’s The Beef?…Price
The first decade-and-a-half of this century saw a very strong increase in the price of all meats in
the United States, perhaps as a consequence of strong worldwide growth and the overall increase
in the commodities prices. At the same time, Americans continued to eat less beef, substituting it
for pork and, perhaps, other meats and poultry. Meanwhile, Americans love for chicken continued
to advance independently of what was happening to beef consumption. In the figures below, it is
probably clear that a fundamental reason for the decline in beef consumption has been the
difference in prices between these different types of meat.
Figure 3
Figure 4
Meat & Poultry Consumption by Type
Price Index for Meat & Poultry
In Billions of Dollars
$60
$50
The price for
every type of
meat has risen,
but the pace at
which the price
of beef has
increased has
been faster than
for other meats.
2
$60
Beef and Veal: Feb @ $31.9 Billion
Poultry: Feb @ $48.3 Billion
Pork: Feb @ $27.9 Billion
Fish and Seafood: Feb @ $11.5 Billion
Other Meats: Feb @ $29.9 Billion
$50
$40
$40
$30
$30
$20
$20
$10
$10
Index; 2009=100
160
160
140
140
120
120
100
100
80
80
60
60
Beef and Veal: Feb @ 133.8
Pork: Feb @ 115.4
Poultry: Feb @ 111.9
Fish and Seafood: Feb @ 120.9
Other Meats: Feb @ 113.8
40
20
$0
99
01
03
05
07
09
11
13
15
17
$0
0
99
01
03
05
07
09
11
13
15
17
40
20
0
Source: U.S. Department of Commerce and Wells Fargo Securities
Since the early 2000s, the increase in the price of beef had, for the most part, outpaced increases
in the price of other meats. The price for every type of meat has risen, but the pace at which the
price of beef has increased has been faster than for other meats. This was especially true as the
U.S. economy got out of the Great Recession. Beef prices skyrocketed starting in 2010 and then
accelerated again in 2014, whereas other meat prices continued to increase but at a much slower
Eat More Chicken, Beef, Pork, and Fish
April 24, 2017
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
pace. Furthermore, beef prices have dropped considerably since early 2015 even as the price of
poultry has increased slightly during the past several years.
What is also interesting from analyzing the data on meat and poultry consumption in the United
States is that the latest wave of increases is benefiting all industry participants (Figure 3). Still,
beef consumption is the only meat that is lower today than in 1999 even though it has increased
considerably during the past couple of years. Today, the quantity of beef consumed for home
consumption is down 16.6 percent compared to January 1999 while poultry consumption is
24.6 percent higher, pork is up 22.4 percent, other meats are up 43.5 percent and fish and seafood
is up 9.4 percent, all during the same period of time.
Econometric Results: Beware of Pork 2
Our econometric results are very telling regarding the relationship between these different types
of meat in the consumption decisions of Americans. The results clearly show that each of these
types of meat is highly sensitive to its change in the price. That is, consumers in these markets are
highly price sensitive to the price of that meat, i.e., if the price of poultry increases then
consumption of poultry declines, everything else equal.
Furthermore, it is clear that consumers of every type of meat are very aware of the price of pork.
The econometric results on the different types of meat show that poultry, beef, fish, and other
meats consumption are vulnerable to changes in the price of pork. If pork prices increase then
consumption of each of these different types of meat increases, everything else equal, and vice
versa.
However, the consumption of poultry, beef, fish, and other meats does not respond to a change in
price of each other. From our analysis, it is clear that the demand for poultry does not depend on
the price of beef, fish, and other meats and the demand for beef does not respond to the price of
poultry, fish and other meats, and so forth.
We also split the whole time period in two, before the Great Recession and afterward, including
the Great Recession to see if there have been changes between the two periods compared to the
whole period. We found that there were no measurable differences in terms of meat consumption
and the relationship between these variables.
Does this mean that pork consumption only depends on the price of pork and that the price of
poultry, beef, other meats and fish does not affect the consumption of pork? That is basically close
to the truth, according to our econometric analysis. Although we found that, especially during
some of the periods considered, the price of fish had a small effect on the consumption of pork,
the result was not statistically significant to change our general view on this issue.
This means that pork consumption is, according to our analysis, the ultimate competitor versus
poultry, beef, other meats and fish consumption.
Conclusions
In this report, we examined the consumption of different types of meats and poultry by the
American consumer. We were not looking at what Americans eat at fast food restaurants or at full
services restaurants but at what they buy for home consumption. First, we pointed to the strong
decline in the price of meats and poultry during the past two years, which helped push the
consumption of meats and poultry to historical highs today.
According to our
analysis, pork
consumption is
the ultimate
competitor
versus poultry,
beef, other
meats and fish
consumption.
However, we also saw the differences between the consumption of different meats and pointed to
the secular decline in meat consumption over the past several decades while the rest of the sectors
continued to enjoy increases in consumption, particularly poultry, pork and other meats
consumption.
We also conducted an econometric analysis on the different types of meat and poultry and
concluded that all types of meat are vulnerable to changes in their own price and to the price of
pork while the consumption of poultry, beef, other meats, and fish do not respond to a change in
2
Econometric results are available upon request.
3
Eat More Chicken, Beef, Pork, and Fish
April 24, 2017
WELLS FARGO SECURITIES
ECONOMICS GROUP
the price of their potential competitor other than pork. This means that pork consumption is the
real deal in terms of competitive pressures for poultry, beef, other meats and fish and that the fate
of these sectors’ consumption depends on the path of pork prices.
4
Wells Fargo Securities Economics Group
Diane Schumaker-Krieg
Global Head of Research,
Economics & Strategy
(704) 410-1801
(212) 214-5070
[email protected]
John E. Silvia, Ph.D.
Chief Economist
(704) 410-3275
[email protected]
Mark Vitner
Senior Economist
(704) 410-3277
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Jay H. Bryson, Ph.D.
Global Economist
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Sam Bullard
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Nick Bennenbroek
Currency Strategist
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Anika R. Khan
Senior Economist
(212) 214-8543
[email protected]
Eugenio J. Alemán, Ph.D.
Senior Economist
(704) 410-3273
[email protected]
Azhar Iqbal
Econometrician
(704) 410-3270
[email protected]
Tim Quinlan
Senior Economist
(704) 410-3283
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Currency Strategist
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