To better understand the AFBD, note this recent demand increase reflects per capita consumption declining by 4.6 percent and real (inflation-adjusted) prices increasing by 11.3 percent ($5.51 per pound nominal price). If real prices would have increased by 7.1 percent, then the AFBD index would have been unchanged from the third quarter of 2013. The fact prices increased more than this 7.1 percent, "no demand change" level signals that beef demand improved notably.
This most recent illustration provides one of multiple historic examples of how beef demand can improve when per capita consumption declines, highlighting critical concepts. First, despite fairly widespread confusion on the topic, per capita consumption is not demand as consumption alone says little about the value consumers place on beef offerings.
In fact, there have been periods of beef demand declining when per capita consumption had increased because prices had to notably fall to move product. Second, the realized 11.3 percent price increase exceeding the index-suggested price of 7.1 percent that corresponds with no change in beef demand clearly signals ongoing demand enhancement.
That is, while consumers are being offered less beef currently (largely reflecting well noted production reductions), there is nothing forcing consumers to pay "this much more" for beef, and the fact they are voluntarily doing so is a very positive thing for all industry stakeholders.
Given the generally tight cattle and hence beef situation, cattle producers would be realizing historically high prices with a flat or stable beef demand environment. What is critical to really appreciate is that this tight supply situation has been coupled with an extensive period of demand improvement. This ongoing demand enhancement has provided yet another factor "pulling up" cattle and beef prices.
Like many other economists, yours truly believes many things can be explained by understanding supply and demand factors. The sooner beef industry stakeholders appreciate the critical role of both, decision making and overall industry viability will correspondingly improve. At some point in the future, the support of tight supplies will mitigate, and the ability to understand and act upon demand signals will only be further heightened. 
Glynn Tonsor is an associate professor at Kansas State University, Department of Agricultural Economics. This article originally appeared in the In The Cattle Markets newsletter.
References omitted but available upon request. Email editor@progressivecattleman.com.
