What If There Was No Checkoff?
By Steve Meyer, President of Paragon Economics, Inc.

Where would the U.S. pork industry be without the Checkoff?  No one can answer that question with certainty.  It is one of those “mysteries of the road not traveled” -- one that producers should be glad they did not have to traverse.

What we can do, though, is consider the paths of the various meat species before and after the landmark 1986 beginning of the legislative Pork Checkoff and pose the question, “What if those trends had continued?”  The focus will be pork demand.

Recall that demand is neither consumption nor price alone.  Demand for a product is the set of prices that consumers will pay for various quantities of product.  It is a collection of price-quantity pairs that can be drawn as a line in a graph with price on one axis and quantity on the other.   One way to measure demand is to compute an index that represents the movement of the line.

Figure 1 shows demand indexes, computed by the University of Missouri, that  represent the shift of the demand function for each species each year.  The indexes actually represent the percentage of the 1985 U.S. per capita consumption that could have been sold  and still have maintained 1985’s deflated retail price level. 

Pork and broiler demand indexes reached record levels in 1973, while beef hit its zenith in 1976.  
 

“Fat Phobia” Was On

Shortly thereafter, the medical community made sweeping indictments of fat and cholesterol for a host of health problems.  “Fat phobia” was on, and the demand for both beef and pork began to plummet, each falling by 3.9 percent per year from 1980 through 1985. 

Even broiler demand fell in the early ‘80s, losing nearly 15 percent from the level of 1979 by the end of 1982.  But then some curious things happened. 

First, broiler demand stabilized in 1983 and then began its remarkable 20-plus year run that continues today.  The causes of this demand turnaround were the perceived fat and cholesterol advantages of chicken and its entry into the fast food market. 

Chicken sandwiches began to appear in 1981 and 1982, and McNuggets made their debut in 1984.  The rest, as they say, is history.

In addition, the heretofore dim fortunes of the beef and pork industries parted ways in 1985 and 1986, as pork demand stabilized and beef demand continued to decline.  There are many potential causes for this divergence. 
 

Turn-around Coincides with Start of Checkoff

Improved leanness of hogs, new trimming and cutting methods and better processing all helped improve the perception of pork products.  But the fact that the turnaround coincided almost perfectly with the beginning of the Checkoff (and thus a dramatic rise in promotional funds) and the launch of The Other White Meat® promotional campaign cannot be ignored. 

And what would have happened had pork demand not stabilized in the mid-1980s?   A couple of what-if scenarios can help us answer that question, at least hypothetically.

Figure 2 shows two paths that the pork demand index might have taken had something not changed.   The lower path assumes that the 3.9 percent-per-year decline of the early ’80s would have continued through 2005.  Had it done so, the index would have stood at 42.4 instead of 95.3 last year, and things would have been VASTLY different for pork producers. 

Had quantity been reduced every year to maintain the real retail price level of 1985, U.S. production would be 48 percent smaller.  Had prices been reduced in order to sell the amount of pork consumed per capita in 1985 on the hypothetically lower demand curve, prices would now be 64 
                                                                                          percent lower. 

It’s obvious that our industry could not function if retail prices were 64 percent lower.  So, the more likely outcome would be somewhat lower prices and a substantially smaller consumption and production base. 

But some would point out that even the beef industry, whose product demand fell consistently until 1998, did not see the rate of decline stay the same after 1985.   So what if pork demand had fallen by only half of the 1980-85 rate (ie. 1.95 percent) through 2005? 

Production would have been 26 percent smaller to maintain 1985 real retail price levels, or prices would have had to have been 34 percent lower to have sold the same amount of product per person as in 1985.  Both are still almost unthinkable numbers.

While retail pork demand at about the same level as in 1985 is definitely not the result anyone had hoped for, we all need to realize that it is far better than many other possible results.  Was the Checkoff responsible for these foregone losses?  There’s no way we can determine that with certainty and it is almost certainly not entirely responsible. 

But the timing of the change in the trend and the initiation of aggressive funding and marketing by U.S. pork producers is just too close to not credit it greatly for the industry’s current stature and success.