Rabobank released its October North American Agribusiness Review, detailing key market trends in regional agriculture. These include cutting interest rates in response to inflation and a return to profitability for the animal protein sector.
The report indicates a shift in monetary policy as the Federal Reserve and central banks in Mexico and Canada adjust interest rates in response to evolving inflation trends.
In the U.S., the Federal Reserve lowered rates by 0.50 percentage points in September, marking a pivot from curbing inflation to fostering labor market stability. Further rate cuts are anticipated through early 2026, though policy directions may shift depending on election outcomes and potential tariff policies.
In Mexico, Banxico is also easing rates with expectations for additional cuts due to cooling inflation. Similarly, the Bank of Canada is following with rates dropping by 0.25% and two additional cuts likely before year-end. This gradual easing across North America aims to stabilize economic activity while responding to specific inflationary pressures.
Cattle sector
The report highlights several key trends in the cattle sector. The U.S. cattle supply remains sufficient, although feedyard placements from January to August saw a modest decline of 2% compared to the previous year. This decline was partially offset by increased imports of feeder cattle from Mexico, which rose by nearly 200,000 head. Consequently, fed cattle inventories are almost in line with last year’s levels, and feedyard numbers as of Sept. 1 are up slightly by 0.6%.
Regarding beef demand, Rabobank said consumer interest has remained resilient, with year-to-date demand tracking 5% higher than in 2023. This increase was especially notable after the USDA Choice-Select boxed beef cutout values fell in the third quarter, bottoming out near $294/cwt in late September. Since then, a recovery in primal values has supported carcass prices. Additionally, Canada’s cattle sector has seen reduced cow slaughter numbers, contributing to a slower rate of herd liquidation. However, persistent drought in Mexico is limiting further expansion of its beef herd, with feeder cattle exports to the U.S. staying strong as a result.
Retail and foodservice
While beef demand may be resilient, the report states food inflation is up, with grocery prices rising due to shifts in consumer habits and increased private-label product purchases. Private-label products, which are typically cheaper alternatives to branded goods, are gaining popularity as economic pressures drive demand for affordable options.
Rabobank wrote U.S. restaurant demand continues to decline, with transactions dropping 6.6% in Q3, partly influenced by rising foodservice inflation driven by labor and rent costs. Additionally, hurricanes impacted restaurant traffic in the Southeastern states, particularly Florida, Georgia and North Carolina.
Points of interest
The report also notes the challenges in the animal protein sector and highlights the impacts of logistics, climate and feed trends on agribusiness.
Rabobank reported dairy production showed marginal gains, with August marking a slight improvement in milk per cow, while herd sizes remain constrained by high replacement heifer costs. The pork market reflects steady conditions as herd liquidation slowed, inventories slightly increased and export volumes grew by 6% year over year. In the poultry sector, ready-to-cook chicken production has risen due to heavier bird weights despite ongoing challenges with hatchability. Overall, these sectors illustrate a balancing act between supply pressures and steady consumer demand, the report said.
Regarding feed, Rabobank said lower distillers dried grains prices provide some relief to livestock producers, with prices settling below the five-year average. This decrease, along with increased soymeal production, is expected to help balance feed costs for livestock, benefiting cattle and dairy operations facing feed-related pressures.
Logistical challenges, including labor strikes and hurricane disruptions, affected North American ports, driving up costs on major routes, especially for refrigerated shipping.
A mild La Niña could bring drier conditions to the southern U.S., potentially stressing winter wheat used as feed and impacting cattle operations. At the same time, the northern states may see improved soil moisture but potential delays in spring planting. — Charles Wallace, WLJ contributing editor
