Beef prices are reaching record levels in some international markets with localised 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 per cent higher than those of April 2019 and retail prices were up by 11.5 per cent.
“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 per cent 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 per cent last February.
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 favour 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 was 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 per cent in April and are running 11 per cent below the five-year average. China accounted for just 17 per cent of that, down from 24 per cent in 2019.