Beef prices reached records in many regions last year, thanks to continued consumer demand and tighter beef supplies. However, softening consumer sentiment and weaker beef prices toward the end of 2022 have flowed into this year, Rabobank said in its latest Beef Quarterly Q1 report. Beef supplies are favorable to higher beef prices, but consumer confidence will continue to be tested, the report read.
“China will remain a focal point, as the world watches to see how quickly the giant emerges from Covid lockdowns amid a slowing economic environment,” the report read. “It is anticipated that Chinese demand for beef will pick up in (the second half of) 2023, boosting global beef prices.”
Rabobank said the U.S. will be the other focal point after it set records in beef volume and value in 2022. The beef cattle inventory has dropped to its lowest point since 1962 and feedyard inventories are declining, which will lead to a drop in global beef supplies. Beef production through the rest of the first quarter will be steady, although a small boost in Australian and Brazilian production will come close to offsetting declines in the U.S., European Union 27 and New Zealand. While most regions have seen downward cattle prices, the U.S. has seen higher prices due to limited supplies.
Eyes on China
China’s extended COVID-19 restrictions influenced beef consumption more than in other countries, and the removed restrictions will likely affect beef consumption and impact global markets. China’s reopening will offer opportunities, but also volatility in the market. Household beef consumption is expected to bounce back from 2022 lows, but Rabobank poses the question will the pent-up consumption be sustainable?
“After three years of living under Covid policies, we believe Chinese consumers are becoming more pragmatic, spending more money on the products which they perceive to be practical, valuable and worthy,” the report said. “Seeking added value will be important for consumers.”
Younger generations, middle- to high-income families and health-conscious people are increasing their beef consumption, the report said, which they forecast will lead to a gradual increase in quality beef consumption. However, total beef consumption may increase more slowly.
The Chinese beef market is also beginning to change, with an increase in beef sales in retail channels and not just foodservice channels. This is likely due to growth in cooking tech. The pre-prepared dish market is also growing, which has seen double-digit growth in the past two years, the report said. This is expected to continue over the next five years, albeit at a slower rate.
Rabobank expects China beef consumption to rise and for the beef market to steadily expand in the coming years, despite headwinds in the overall economy. However, the entity does expect a slowdown in beef imports in the first half of 2023, as the high inventory of frozen beef will take months to consume. Total import volumes in 2023 may be flat or only slightly higher compared to the year prior.
China became a top three U.S. beef exporter in 2022, but growth in export volumes slowed throughout the year, the report said. The U.S. will face headwinds into the China market as U.S. supplies decline and prices increase.
Domestic outlook
Production declines in the U.S. will become increasingly prevalent by spring and summer, the report said. Historically low cattle numbers support the forecast for smaller 2023 beef production.
Winter weather also impacted cattle slaughter at the end of 2022 and the beginning of 2023. Weekly slaughter levels declined as plants were slowed by colder temperatures, and cattle-feeding regions were hit by heavy snowfall, reducing cattle weights and performance. As a result, steer weights are down 9 lbs. over the last five weeks and first-quarter beef production is expected to be down 2-3%.
The All Fresh Beef retail price declined in 2022, down 4%, signaling an increased willingness from retailers to pass discounts on to consumers, the report said. The wholesale beef market was consistently weaker than year-ago levels, with boxed beef cutout values 12% lower on average. “Weaker real consumer incomes and ample U.S. animal protein supplies were also motivating factors,” the report finished. “Expect first quarter U.S. retail beef prices to be 1-2% softer than prior year.” — Anna Miller, WLJ managing editor
