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DETERMINANTS OF BEEF DEMAND

The retail price of beef rose 7% in May responding to a temporary supply squeeze. Beef supplies stabilized in June, food service is back at the table and nearly one million Canadians are back at their workplaces. The full impact of public health policy is now unfolding with consumer demand the leading market force to watch next quarter.

Cautious optimism is warranted. Employment grew 1.8% in May and consumer confidence rebounded 19% in just three weeks. This positive outlook differs from the trends behind historical 21st century lows in beef demand. Two years after the 2008 financial crisis, the demand index fell eight per cent from 103 to 95 in 2010. These lagging effects are not apparent in today’s economic reality. The gradual and sustained economic dampening in 2009 is nothing like the sharp drop and rebound that disrupted 2020’s second quarter economic activity. Unlike 2009, youth and low-income earners have been hit hardest, meaning that the demand for premium products may still be sustained today. The bottom of this recession may be behind us, but no one is dismissing the potential of a second wave of COVID-19 and further disruptions.

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