Global scale - Cattle markets continue tight supply, good pricesWritten by Saige Albert
As the first weeks of 2015 close out, cattle producers across the U.S. are largely optimistic about the year to come, with tight supplies and consumer demand supporting the industry.
“Tight global cattle and beef supplies continued in the fourth quarter of 2014, although prices tempered from their record highs,” said Rabobank in their quarterly beef report.
Rabobank further noted that the U.S. continues to be a global driver in the beef industry, as import demand affects prices and volumes for other countries.
“The U.S. continues to be the driver in the global beef market, with constrained supply and strong demand keeping prices high. A recent strengthening in the U.S. economy and dollar will support continued imports to the U.S. However we are watching a drop in the oil price and depreciation of the Russian Ruble given Russia’s status as the world’s largest beef importer,” explained Rabobank Analyst Angus Gidley-Baird.
Looking into 2015, Rabobank noted that the major question moving forward is whether a “new norm” has been reached for prices or if there is potential for continued increases.
Rabobank also called the current global beef market a “finely-balanced market,” noting that a decrease in Australian export rates and herd decreases in Mexico and Canada could have big impacts.
In 2014, Australia set export and slaughter records, but dry summer forecasts are anticipated to keep slaughter numbers high and prices low, according to Rabobank.
The organization also saw a positive outlook for New Zealand moving into the first quarter of 2015, as a result of strong demand from the U.S.
China has been marked as an important factor in global beef trade recently, and Rabobank said, “Retail beef prices in China are expected to remain stable through the first quarter of 2015, as consumption is not strong enough to push prices beyond current historically high levels, despite tight domestic supplies and continued growth in imports.”
Brett Stuart of Global AgriTrends noted, “China’s rapid economic development during the past two decades, multiplied by 1.3 billion people, has created a wave of consumerism across the nation … and now, it may be beef’s turn to ride that wave.”
Stuart continued that though China’s consumers eat a mere 10 pounds of beef per capita, based on 2013 figures and the price they pay for beef continues to move higher.
“In January 2011, retail beef in China averaged $2.57 per pound,” he said. “Three years later in January 2014, that price had jumped 81 percent to $5.06 per pound, surpassing, for the first time ever, U.S. retail beef prices.”
Over the same period, per capita consumption increased from 9.1 to 9.8 pounds per person.
“The rising demand for beef has not been matched by Chinese supplies,” Stuart added. “Chinese cattle slaughter declined by 3.7 million head from 2008 to 2013, an eight percent decline.”
Despite high demand, Chinese trade regulations mean that beef must originate from Australia, Uruguay, New Zealand, Canada or Argentina, which means that U.S. producers don’t necessarily see the benefits.
“Chinese demand for beef is strong and growing,” Stuart mentioned. “This newfound demand for beef will rise in coming years. United States ranchers, feeders and processors stand to gain significantly from an access agreement for U.S. beef to China.”
Consumption in Indonesia also remains high, despite tight supply. Concern over potential trade developments between China and Australia mean already tight supplies could constrict even further.
Brazil has seen strong international demand for their beef product, which will likely continue into 2015, said Rabobank.
They added that tight global supplies, demand from Russia and the re-opening of the Chinese market have all supported Brazil’s export trade.
Argentina is also seeing impacts, and their exports are likely to be reduced compared to previous years, reported Rabobank.
“An overvalued exchange rate currently makes Argentine beef more expensive relative to other countries in the region,” they explained.
Closer to home, Rabobank said that 2015 will be critical for Canada, and Mexico is seeing the strain of reduced numbers.
“2015 could be a critical year for Canada,” they explained, “as the country needs to determine whether it starts rebuilding or further downsizing the industry.”
Further, in Mexico, they commented, “Low cattle availability continues to cause constraints, although this is partially offset by increased cattle weights due to lower feed costs and better pastures.”
The global climate for the U.S. beef industry appears positive for the beginning of 2015, with export markets continuing to play a crucial role in the future.