A recent report from Rabobank, “Global Beef Quarterly Q4 2022: As the US Goes, So Goes the World,” shared that while the global beef market remains solid, growing economic and supply-side pressures may change that.
Global beef production for the upcoming first quarter of 2023 is expected to be similar to 2022 levels, but the market should keep an eye on the U.S., Rabobank cautioned. The country is headed toward a downward production cycle, which will impact prices and trade distribution in the coming years.
Cattle prices are forecast to be generally favorable, supported by positive seasonal conditions and continued consumer demand, the report read. However, demand could soften, given high inflation and declining consumer confidence.
“We also see emerging supply-side dynamics that will influence markets,” said Angus Gidley-Baird, senior analyst in the Animal Protein sector at Rabobank. “The central question is whether beef markets are shaped more by demand-side or supply-side pressures as we head into 2023.”
Global outlook
The bank’s report said that while global beef markets appear benign on the surface, they may be hiding strong undercurrents and pressure building in the system. Global beef production is split by hemisphere, with northern countries mostly in a declining production phase and southern countries increasing production. In the last quarter of 2022 and the first quarter of 2023, Europe and U.S. production is expected to decline, while production in Australia, Brazil and China is expected to be flat or increase.
Currency is becoming a greater influence on global cattle prices, Rabobank said. Most global cattle prices were steady over the third quarter, but the strength of the U.S. dollar has favored exporting countries, with cattle prices dropping in U.S. dollar terms. This also means the U.S. has the most expensive cattle.
“Rabobank forecasts the US dollar to remain strong into 2023, which will put pressure on the high volumes of US beef currently being exported,” the report read.
U.S. oulook
Cow and heifer slaughter in the U.S. for 2022 will likely top out at its highest level since 2000, at 17.6 million head, the bank said. Beef cow liquidation is up 11.6% year to date, and heifer slaughter was up nearly 5% through September. Heifer slaughter amounted to a 9,000 head per week increase from 2021, the report read. Weekly steer and heifer slaughter was up 3,500 head during the same period.
“So, without the additional heifers, fed cattle slaughter would be down year-over-year,” the report read. “Considerable supply gains have come by eliminating young herd replacements from US cow-calf operations this year.”
Beef production is forecast to reach a new record high at 12.8 million metric tons this year. However, USDA Prime and Choice carcasses are down 5% on the year, which amounts to about 11,000 fewer carcasses a week. This is the result of several factors, according to the report. Feedyards are removing tallow from feed rations due to soaring feed costs, and steers and heifers are being processed at a younger age.
The Prime/Choice spread reflects the shortage in the market and surpassed $90/cwt for the first time ever this fall. Rabobank says to expect a wider-than-normal spread during peak middle meat buying periods this fall and next spring.
The boxed beef cutout was better than expected in early summer and had stronger middle meat demand. Later in the summer, the market fell to levels generally supported in the long term, about $240/cwt. The cutout has now rallied beyond seasonal norms on stronger end meat values, the report read. Middle meat demand could rise above recession risks in the fourth quarter, but demand pressures could increase next year if consumer spending decreases, the report concluded. — Anna Miller, WLJ managing editor
