The data indicate the consumer- level demand for chicken rose marginally in 2010 while those for pork and beef declined. The annual indexes appear in the chart on the right and it is clear that the 2010 declines for beef and pork were relatively small by historical standards – but were declines nonetheless.

Chicken demand rose by 0.7 per cent for the year. That growth was driven by 3.1 per cent higher domestic per-capita chicken consumption and real, i.e. deflated, retail chicken prices that were three per cent lower than in 2009. A stable chicken demand curve in the standard P-Q space would have resulted in a larger negative price change than what was observed.

Pork demand fell by 1.1 per cent for the year, the result of a 4.7 per cent decline in domestic per-capita pork consumption and a 4.9 per cent increase real pork prices. Just the opposite of the situation with chicken, a stable demand curve would have resulted in a larger increase in average real retail price than what was observed.

The 1.1 per cent decline in consumer-level beef demand was caused by a 2.4 per cent decline in US per-capita consumption and a 1.5 per cent increase in retail beef prices. Again, a stable demand curve would have yielded higher prices give a decline in domestic consumption of that magnitude.

A few caveats are appropriate here. The 'consumption' figures are, in fact, product disappearance in the domestic market and might be more appropriately viewed as 'domestic availability' of the various meat and poultry products. The prices used here are from USDA's monthly retail price series. That series is about all we have to use but is subject to its own list of potential foibles – a narrow set of products, data that appears to lag market conditions considerably and not fully accounting for prices of items sold on feature/ special, etc. Finally, we use an elasticity of retail demand of –0.75. That figure is easily within the range of the various elasticities estimated by a number of economic studies over the past twenty years. We have no reason to believe it is inaccurate but it is, in fact, a value assumed to be applicable.

But the annual demand index data are only part of the story for 2010. Below are charts of year-over-year change of the monthly demand index estimates. As can be clearly seen, the indexes at year's end are dramatically different from the average for the year. All three species were dealing with demand challenges at the beginning of 2010. Much of that malaise may have been attributable to the recession that the long dry spell endured by foodservice operations, especially given the duration of the negative demand episodes for beef and chicken, both of which have more exposure to whatever is going on in restaurants and other eating establishments. Whatever the drag, it appears to have changed dramatically in mid-year as all three indexes turned strongly positive. That is especially true for pork where the November and December indexes were 14 and eight per cent, respectively, higher than one year earlier.

So how will high meat and poultry prices impact demand? The answer from Econ 101 class is that they will have no impact since prices are part of the demand function and changing them merely moves a consumer ALONG a demand curve, it does not shift that curve. That assumes, of course, that the prices change so that their relative levels remains that same and there lies the rub. Higher input costs will favour the more efficient converter of feed to gain, i.e. chicken at something under two pounds of feed per pound of gain, or the species that can best substitute other inputs.

We believe cattle to be the species that fits the last description best but it is also the species that is by far the least efficient in converting feed to gain. Hogs are intermediate on that count with the national feed conversion ratio now in the low 3s and some herds actually under 3:1. Hogs cannot utilise roughages like cattle can but pork producers have aggressively found and incorporated alternative ingredients into their diets to keep costs as low as possible. Pork production costs have risen roughly 60 per cent since pre-ethanol days. Judging fed cattle production costs is a bit more difficult since some of the increase since 2006 has been pushed back against feeder cattle values.