Aside from the U.S., most beef markets are seeing softer consumer demand, resulting in lower prices for producers, according to Rabobank in its latest Beef Quarterly Q3 report.
Rabobank noted that cattle prices have split into two groups: those in North America and Europe, and the rest of the world. Softer consumer demand, particularly in Asian markets, has made it challenging to move beef purchases made through 2022 and into 2023 in anticipation of recovery from COVID-19, the bank said.
The slower demand has resulted in softer prices in the rest of the world. In comparison, strong consumer demand and declining supply have led to higher prices in the U.S.
Compared to 12 months ago, U.S. cattle prices have increased by almost 30%, while Australian cattle prices have dropped by more than 30%.
“This price split is the largest we have seen in the last ten years and compares to the period in 2014 when U.S. prices were also at high levels,” said Angus Gidley-Baird, senior analyst for the Animal Protein sector at Rabobank. “Such a separation in prices will have consequences for beef exporters’ competitiveness, and we expect to see some shift in trade volumes as a result.” Overall, Rabobank anticipates beef production to decline slightly in the third quarter before returning to levels seen in the last quarter of 2022.
Global outlook
In addition to soft consumer demand, Rabobank said prices eased on producer concern about the seasonal outlook, resulting in lower buying activity as cattle numbers were building in Australia. Processors remained constrained as they balanced whether to increase capacity with the available cattle and demand in the end markets. Slaughter numbers are up 23% through July as compared to 2022. Australian beef exports are also up 30% year over year, especially to the U.S., where volume is up 103% for July.
Brazil’s beef export volume was also higher in June, the second highest in history at 135,000 metric tons. China remains the main destination for Brazilian beef exports, accounting for half of the country’s exports, with the U.S. the second largest at 7%. Rabobank said it is unclear if the record pace for exports will continue due to a higher availability of pork in China, and the export quota has already been reached in the U.S. Live cattle prices were 22% lower due to lower domestic consumption due to cheaper proteins such as chicken.
Prices for domestic and imported beef were down 23% year over year in July for China due to high inventory levels and the slaughter of dairy cows in some regions. However, Rabobank said that chilled and fresh beef imports remained relatively strong in the first half of the year. Prices for frozen beef began to climb after July, and Rabobank anticipates it is due to a rebound of lower prices. Still, with the high inventory levels, Rabobank expects imports to decline in the second half of 2023.
Beef imports were lower in Japan by 23.4% year over year in June and were down 4.2% for the second quarter. Rabobank attributed the decline to the high beef stock level, soaring local U.S. beef prices and the weakening yen. Rabobank wrote that the country’s per capita consumption of beef was 6% lower than the previous year, resulting in ending stocks of beef being 25.4% higher. Rabobank estimates there is a three-month supply of consumption stocks and the volume will limit any increase in imports.
North America
Beef exports from Canada are down 3% compared to last year, primarily to Japan, South Korea and the U.S. Cattle slaughter is down 5% compared to the first half of last year. According to Rabobank, this was driven by a 7% reduction in fed steer and heifer slaughter. However, cow and bull slaughter were up 6%, driven by drought conditions, particularly in southern Alberta. Calf and feeder prices continue to trend upwards, with the Alberta markets trading near $235/cwt in early August. Despite being down 5% from June highs, it remains 33% higher than a year ago.
Drought also remains a concern in Mexico’s coastal region and center of the country. These regions are feedstuff-producing regions and Rabobank said it bears watching in the next several months. With U.S. cattle and calf supplies at levels rivaling 2014, demand for Mexican feeder cattle was up 38% in the first half of the year. Steer prices remain strong, with prices reported by USDA through ports averaging $200/cwt for 500-pound steers. Despite the strong prices, exports to the U.S. were down 6% year over year.
Rabobank said with the downward trend for the U.S. cow herd and cattle supplies, the beef trade is in transition. Beef exports are down 14% compared to last year and imports were 5% higher in the last quarter. The higher imports are attributed to current beef prices attracting cheaper imports from Australia, Canada and Mexico. USDA reported the All-Fresh Beef prices were 6% higher than last year at $7.79/lb. Despite higher beef prices reaching consumers, demand remains at the fifth highest in the last 30 years, and Rabobank anticipates the higher prices will test demand. — Charles Wallace, WLJ contributing editor
