“Industry performance has been mixed across the globe,” explained Rabobank analyst Albert Vernooij. “The broader picture for demand still points to tempered consumer appetite to paying high prices for beef as increases in disposable income worldwide appear to be slowing and threats of inflation continue across the globe.

The relative value proposition for beef has diminished as beef prices have risen relative to chicken and pork.

“We maintain the view that global beef supplies will remain near 2012 levels with a bias toward a minor increase driven by the southern hemisphere,” added Vernooij.

“This will be led mainly by Brazil, Australia, Argentina, Uruguay and New Zealand – coupled with continued liquidation in U.S. beef supply given the ongoing drought-induced cowherd liquidation. In addition, exports from India have moderated considerably.”

Report highlights include:

• In the European Union (EU), prices continued to increase as a result of a tight supply and higher demand for beef as many players have had to replace horsemeat with “real” beef.

This is possibly one of the reasons behind Brazil’s growing exports to the EU this year – up 42 percent to 25.5 thousand metric tons (MT) on the year.

Prices are expected to remain elevated for the remainder of 2013, but the strong increase experienced since February is expected to level off.

• Companies located in South America, particularly in Brazil, should continue benefiting from the herd recovery and brisk exports, which are receiving an additional lift from the depreciation of the Brazilian real.

However, rising Brazilian inflation along with declining pork and poultry prices may limit Brazilian players from obtaining higher prices in the domestic market. Even so, the general landscape for processors’ margins is still positive.

• In Australia and New Zealand, cattle prices have continued to decline due to increased marketing driven by drought. While this is bad for ranchers and feedlots, the packing segment is benefiting from this environment in the short term.

• Chinese beef production has been flat, and prices have surged. Rabobank expects the value of China’s beef market to grow in excess of 10 percent annually over the next three years.

High beef prices in China, combined with recent signs that the country will open more doors to the global beef market, suggest continued growth in imports. This scenario may also trigger interest from Chinese beef players in exporting companies and countries.

Brazil

Recent Brazilian cattle prices have been firm to steady as beef demand continues to outstrip beef supply.

This is especially important as a break in production was seen through the Brazilian winter (June to September).

Most pasture-fed cattle had been marketed, and much of the feedlot sector was not ready to slaughter with the approach of October and November.

The Brazilian Center for Advanced Studies on Applied Economics noted active buying in slaughterhouses. Analysts have said this was due to beef traders striving to satisfy expanding export markets. Much of the pasture-fed beef has already been traded with the feedlot sector trading few cattle.

The Brazilian Institute of Geography and Statistics (IBGE) quarterly survey shows Brazilian cattle slaughter during the first three quarters of 2013 increased 12.7 percent year-on-year, the highest volume increase registered for the period since 2007. Correspondingly, beef production also rose, up 13.2 percent year-on-year.

The rise in cattle slaughter was seen across all regions in Brazil. The midwest increased 17.5 percent year-on-year – with a highlight for Mato Grosso state, up 20.5 percent, remaining the major beef producer in the country.

The southeast region also rose significantly, up 18 percent year-on-year, followed by the north region (8 percent), south (2.3 percent) and northeast (2.3 percent). Female slaughter rose 3 percent year-on-year, accounting for 46.9 percent of total slaughter.

According to IPCA/IBGE (Consumer Price Index – Brazilian inflation official indicator), consumer beef products have deflated 0.89 percent during 2013, while other animal proteins increased.

For the 12 months to the end of March, beef had the lowest price increase (up 2.15 percent) when compared to other animal proteins, which was also below the general inflation index of 6.6 percent during the period.

Colombia

Animal health and disease control efforts of the Colombian government have been rewarded with the signing of a memorandum of agreement that gives Colombian farmers access to China’s 300 million consumers.

The decision of the Chinese government shows satisfaction at Colombian biosecurity and lifts import restrictions from the last foot-and-mouth disease outbreak.

“The beef protocol signed by Colombian exporters is a recognition of the country’s health management,” said Estupinan Heredia, Colombian Minister of Agriculture.

Heredia, who signed the agreement with Chinese Minister Wang Xiaoyuan and other industry figureheads, said confidence in Colombian beef is testament to its quality.

Other countries such as Australia, Uruguay, New Zealand and Brazil already have a “competitive” health status. Heredia says Colombia is happy to join this list.

Another category exists of “high-quality” health standards. This list comprises Chile, Canada, Costa Rica and Argentina.

Chinese Minister Sun Dawei stated the protocol was important and a reward for all the hard work done in vaccinating for foot-and-mouth disease and improving productivity across the beef sector.

New Zealand

Rabobank animal proteins analyst Matt Costello said improved seasonal conditions beginning in May and tightening of supply have allowed cattle prices to recover through most categories.

“At the beginning of June, the North Island bull price was slightly higher than the corresponding week last year,” Costello said. Nonetheless, total beef slaughter for the New Zealand beef processing season remains 20 percent higher than the same period last year, at 1.529 million head.

After drought was officially declared across parts of the North Island in February, with extremely dry conditions throughout most of the country, the Rabobank report shows slaughter volumes have continued to track well above year-ago levels.

While the U.S. accounts for more than half of New Zealand exports, shipments to China have certainly been “a bright spot” in 2013, Costello said.

“Chinese exports reached 20,178 MT shipped weight, which is well ahead of the 1,211 MT sent last year.” Lower domestic Chinese production and stronger demand for New Zealand product has driven this growth, with the Chinese market firmly establishing itself as New Zealand’s second-largest export market.

“It will be interesting to see how demand – particularly from the U.S. – tracks if New Zealand supplies tighten and importers are required to pay higher prices,” Costello said. 

Clint Peck is former director of Montana’s Beef Quality Assurance program.