The global beef complex is looking strong. Production is up, consumption is up, and prices are favourable. But is there more to this than meets the eye? Rabobank’s latest Beef Quarterly report examines the outlook for the global beef sector.
Global beef production and consumption continues to grow, but is this just the tip of the iceberg? And does the unknown that lies beneath have the potential to cause major disruption? “Pressures are building in some of the world’s major beef markets,” says Angus Gidley-Baird, senior analyst – animal protein. “US weather conditions, low protein prices in Brazil, and changes to live cattle and carabeef trading in Asia have the potential to change the course of the global market.”
US-China trade war
On 23 March, US President Donald Trump announced his intention to impose tariffs amounting to $79 billion on imports from China. In turn, China initially retaliated with a list of 128 US products, soon followed by a further list of 106 items that would be subject to a 25 per cent tariff. Included on this list was beef. But beef trade between the two countries is limited – and realistically, the imposition of a 25 per cent tariff is only expected to have minimal impact on the US beef industry… and even less on broader global beef trade.
US production remains strong
The revised forecast of five per cent production growth in 2018 still holds true, with the early-placed cattle on feed now starting to be turned off. Escalating feed costs will impact the cost of gain and will limit the carcase weight increases. Ongoing dry conditions also threaten increased beef cow slaughter numbers, which are currently tracking 10 per cent higher for the year-to-date (mid-April), compared with 2017.
Australia: Prices stabilising
Rainfall through parts of drought-affected Queensland in late Q1 relieved some cattle liquidation pressures and saw cattle prices rise. However, ongoing dry conditions through other parts of the country have increased sales of breeding cattle and forced earlier sales of lighter young cattle. Despite these increased volumes, cattle prices have stabilised in recent weeks, indicating prices have moved from a producer-driven price-setting environment to one determined by other market factors.
National cattle slaughter numbers for YTD March (1.79m head) were up six per cent YOY. Total beef exports in April (88,179 tonnes swt) were up 32 per cent. Total live exports were up 29 per cent YTD April, driven by demand in countries other than Indonesia, which was down nine per cent.