Home > Rabobank Beef Quarterly: Outlook for Global and Regional Markets

Rabobank Beef Quarterly: Outlook for Global and Regional Markets

Supplier News
The ‘Rabobank Beef Quarterly’ by agribusiness banking specialist Rabobank provides an outlook of the global and regional beef markets.

An overview of the report shows that the Rabobank Global Cattle Price Index dropped 7% from Q1 levels driven mainly by generally weaker demand together with a stronger US dollar, while the Rabobank Beef Forex Index averaged 3% above Q1 levels. The global demand remains stable despite struggling global economic conditions.

The record grains prices is expected to increase the competition between grain fed and grass fed animals. The dependence of the broiler and hog industry on grain and soymeal may benefit the cattle industry. Poultry production cuts are likely, driven by negative margins in the wake of severe feed cost increases, narrowing the gap between beef and chicken prices, and possible shifting demand to beef.

While the Southern Hemisphere is likely to remain under pressure due to increasing supplies, North America is expected to strengthen in price. The North American cattle industry will be driven by tight supplies, with a production imbalance occurring between North America and the Southern Hemisphere.

For Q3 2012, Rabobank expects a slightly larger global supply year over year, driven by either herd liquidation, as in the case of the US and the EU, or by natural recovery of the herd as in Brazil, Argentina and Australia.

The downward pressure on prices will ultimately be balanced against reduced supply as cuts in North American grain-fed meat production eventually take hold. Supply is likely to remain above last year’s levels in important producing countries such as Brazil, Australia and Argentina. However, this will be offset by reduced supplies in North America, where acute pain in grain-fed production will force production cuts.

The Rabobank Beef Forex Index average for Q2 2012 was 3% above Q1 levels, reflecting the strength of the US dollar against Australian and Brazilian currencies, whose values fell below Q1 levels by 4% and 12% respectively and also contributed to the downward trend in international beef/cattle prices.

Global economic conditions may also temper price strength with sluggish demand in the western markets, which account for around 70% of total beef consumption worldwide. The Southern Hemisphere will relieve some upward pressure on prices with record grain prices shifting focus to countries such as Brazil, Australia and Argentina whose beef production systems are based mostly on pasture. Support for prices will eventually come from lower production of cattle and other grain-fed animals.

The Australian Beef Industry

Though prices across all categories ended the financial year above 5-year averages, the rising input costs have offset any gains.

With producers taking advantage of the good seasonal conditions to rebuild herds, slaughter rates for the first six months of 2012 were down 2% compared to the same period last year.

However, overall beef and veal production has been on par with 2011 levels as a result of increased carcass weight at 288kg up from 286kg last year. Prices have held in spite of increased supply in recent weeks thanks to corresponding increase in demand.

Exports to the US were up 46% on 2011 in the first half of 2012 as a result of increased demand for manufactured beef. Recent figures show a slowdown in exports in part due to a stronger Australian dollar versus the US dollar in June.

Exports to Japan and Korea have decreased 10% and 32% respectively as against the first six months of 2011. Growing local production in these countries, strong competition from the US, a strong Australian dollar and slowing consumer demand are some of the factors behind the reduced growth.

The full report is available on the Rabobank website.

Newsletter sign-up

The latest products and news delivered to your inbox