Beef prices rise as global supply gets ‘very tight’
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Beef prices are reaching record levels in some international markets with localized disruptions – including droughts and increased consumer demand in some countries – exerting a “dramatic impact” on global trade, according to Rabobank.
In its Q2 Beef Quarterly research, the bank says a fundamental shift is underway in international beef market dynamics creating a “very tight” global market for beef cattle.
The report’s co-author, Rabobank senior animal proteins analyst Angus Gidley-Baird, says local factors include the post-drought herd rebuilding in Australia which has reduced the number available for slaughter, and soaring demand in the US as restaurants reopen after Covid-related trading restrictions. Meanwhile, Chinese consumers are eating more beef.
“Given the growth in demand (for beef) and global trade, pressures created in the system now mean that what may once have been considered slightly abnormal seasonal conditions (for example) are now causing major shifts to markets,” the report says.
In the US, wholesales prices in April were running 18.5 percent higher than those of April 2019 and retail prices were up by 11.5 percent.
“This is the result of a number of factors, including renewed competition between foodservice and retail triggered by the reopening US economy, combined with grilling season, high consumer incomes, and strong exports,” he said.
In Australia, successive years of drought have forced farmers to liquidate stock resulting in the country’s smallest beef cattle herd in 30 years. East Coast cattle slaughter was down 30 percent in April, for example. These factors underpinned a 30-per-cent year-on-year surge in young cattle prices in February last year and a further 20 percent last February.
“In the US, wholesales prices in April were running 18.5 percent higher than those of April 2019 and retail prices were up by 11.5 percent.”
But it is not all bad news for local farmers, said Gidley-Baird.
“While lower volumes and higher prices make competing in the global market more difficult, the tight market situation is working in Australia’s favor and creating less resistance to our high prices,” he said.
“We believe that current cattle prices in Australia will ease as cattle numbers increase and producer demand dissipates. However, as the supply chain overcomes the disruption here and consumers adjust their price expectations, we believe the market will adjust and a new baseline will be established.”
In China, efforts to increase local beef production are failing to match increasing demand from consumers, forcing the country to rely on imported beef which is in short supply and commanding a higher price. Many Chinese consumers have switched from pork to beef after an outbreak of African swine fever.
“While part of the beef consumed as a substitute for pork and will shift back when pork production recovers, we expect strong Chinese beef demand to remain as new markets have been established,” said Gidley-Baird. “This will continue to drive Chinese beef imports from the global market.”
Australia’s beef exports were down 22 percent in April and are running 11 percent below the five-year average. China accounted for just 17 percent of that, down from 24 percent in 2019.
Questions & Answers
Q.What is causing the current tightening of the global beef market?
What is causing the current tightening of the global beef market?
A fundamental shift in international beef market dynamics is underway, with localized disruptions like droughts and increased consumer demand having a dramatic impact. This creates a very tight global market for beef cattle.
Q.How have US beef prices been affected recently?
How have US beef prices been affected recently?
In April, US wholesale prices were 18.5 percent higher than in April 2019, and retail prices rose by 11.5 percent. This is due to renewed competition, the grilling season, high consumer incomes, and strong exports.
Q.Why is Australia experiencing a reduction in beef cattle available for slaughter?
Why is Australia experiencing a reduction in beef cattle available for slaughter?
Successive years of drought forced Australian farmers to liquidate stock, leading to the smallest beef cattle herd in 30 years. East Coast cattle slaughter was down 30 percent in April.
Q.What is driving increased beef demand in China?
What is driving increased beef demand in China?
Chinese consumers are eating more beef, partly due to switching from pork after an African swine fever outbreak. Efforts to increase local production are failing to meet this rising consumer demand.
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