The latest Rabobank Quarterly report on the status of global beef markets shows high prices and declining production in the U.S. amid potential weakening consumer demand versus increased production and lower prices in the Southern Hemisphere.
“We continue to see North American cattle prices track at high levels, while in the Southern Hemisphere countries, prices remain soft,” said Angus Gidley-Baird, senior analyst of animal protein at Rabobank.
According to Gidley-Baird, the opposing positions have caused a redistribution of beef trade. The contractionary phase in the U.S., following an extended period of herd liquidation, is expected to result in reduced production levels, leading to a need for increased imports and a decrease in exports.
Meanwhile, the expansionary cycle in Australia, along with anticipated drier weather and some liquidation of surplus stock, is projected to boost production volumes. Brazil’s production is also expected to rise, resulting in increased exports from these countries.
Rabobank said North American cattle prices remained elevated. Cattle prices in the U.S. were steady, while Canadian prices rose 3% between June and October. Prices in Southern Hemisphere countries, such as Australia, have experienced a significant drop, down 28% since June, with New Zealand and Brazil also seeing declines, though by smaller amounts.
Overall beef production in Rabobank’s monitored markets is anticipated to decline by 1% year over year (YOY) in 2023, as the increases in Australia and Brazil are insufficient to offset the declines in Europe, Canada and the U.S. Rabobank expects a similar trend going into 2024.
“The volume balance for the major beef producing and consuming regions of the world (that we track) will remain relatively constant in 2024,” Gidley-Baird said.
He continued that while production and consumption remain steady, trade will need to shift according to changes at the individual country level.
“The U.S. will be one of the big movers,” Gidley-Baird said. “After shifting to a net-import position in 2023, we expect production to contract further 4.5%, while consumption drops 3% in 2024, increasing the net-import position.”
Rabobank reported USDA’s All-Fresh Beef retail price has increased for the 10th time since November 2022 from a low of $7.15/lb. to $7.82/lb. in September. Based on a softer demand outlook, the report anticipates prices could average more than $8/lb in 2024.
“Consumer income growth is being undermined by inflation and consumer confidence remains shaken by the domestic recession and geopolitical risks,” Gidley-Baird said.
With the implementation of the European Union’s (EU) regulation on deforestation-free products in 2024, Rabobank suggests that it might impact the flow of beef imports. A decline in cattle numbers within the EU throughout 2023 is expected to result in a 1.5% reduction in EU beef production in 2024, potentially leading to broader implications across the entire beef trade complex, according to Gidley-Baird.
Rabobank anticipates increases in production and exports from Australia and Mexico. New Zealand is also expected to gain, though its growth is limited by production and export constraints. Brazil is expected to supply substantial volumes again to fulfill the quota for non-specified countries early in 2024. Rabobank anticipates production growth of 1-2% YOY, supporting a 2-3% rise in exports. Argentina is also expected to increase YOY by 5-7% in 2024 to meet the heightened demand.
The biggest recipient in the rise of exports is China, where imports are expected to increase by 5% in 2024, driven by a recovering demand, especially in the foodservice sector.
“Indications from China are that the type of products in demand is changing, with more attention being paid to value-for-money products and less to premium ones driven by consumer caution,” Gidley-Baird said. “This consumer caution may be supported initially by reduced volumes of more expensive North American beef and increased volumes of Australian and South American beef.”
Rabobank cautioned the contraction of beef production in the U.S., as higher global prices may result in some pushback from global beef consumers. The report said that margins in the beef supply chain may be squeezed in 2024 to manage higher prices and accommodate consumers. — Charles Wallace, WLJ contributing editor
