W36: Beef Update

In W36 in the beef landscape, Rabobank reports divergent price trends in the global livestock markets so far in 2023. While the United States (US) experienced a nearly 30% year-on-year (YoY) surge in cattle prices due to decreased supply and strong consumer demand, other regions witnessed weak prices due to low consumer demand and increased supply. For instance, Australian cattle prices plummeted over 30% in 2023 compared to 2022. This price gap is the widest in a decade, impacting meat exporters' competitiveness and potentially reshaping export volumes.

Rabobank anticipates a slight decline in beef production in Q3-23, followed by a return to 2022 levels in subsequent quarters. Lower consumer demand, especially in Asian markets, combined with excess meat carryover from 2022, poses challenges for the industry. This is exacerbated by falling meat prices that could lead to losses for wholesalers.

The Center for Advanced Studies on Applied Economics (Cepea) reports that the lean cattle negotiation pace was notably sluggish in Brazil in almost all regions in recent weeks. Cepea notes that despite significant exports demand for cattle fattening, some slaughterhouses and feedlots opt for partnerships with producers to acquire cattle, even as calves. This approach reduces the demand for cattle near the finishing stage. In some cases, the external demand for young animals and the finishing period reduction, achieved through technological advancements, lead to early finishing. This situation contributes to decreased liquidity for cattle at around 24 months of age. The sharp cattle devaluation also discourages replacement, particularly in situations where finishing occurs on pasture.

The fat cattle export price continued to decline in Paraguay in W36, with a recent drop of USD 0.10 across all categories. This situation resulted in males and heifers priced at USD 2.80 per kilogram (kg) carcass and cows at USD 2.40/kg. This downward price trend surprised market participants, who had anticipated a more favorable situation considering the low animal supply. However, a sluggish work pace in processing plants due to slow meat demand contributed to this price drop. Experts expect this downward price scenario to persist throughout Sep-23, with potential recovery anticipated in Oct-23. Experts noted that the global market is currently unfavorable, with Paraguay facing further challenges, including border crossing issues with Chile and a lack of new contracts. Some plants reduced their operations, with others working at minimal levels. The Rural Association of Paraguay (ARP) expressed concern over the significant price drop and plans to investigate the underlying causes.

Lastly, the Korean beef wholesale price is projected to range from USD 12.81/kg to USD 13.56/kg in Q4-23. This is a potential 6.3% to 11.5% decline compared to the average price of USD 14.48/kg during Q4-22. This price drop is expected due to delayed shipments caused by a recent heat wave, coupled with increased shipments after the Chuseok holiday. Korean beef prices are forecasted to rise modestly in Q3-23 due to heightened holiday demand and decreased inventory. However, this price increase is expected to be moderate due to a surplus of slaughter-ready animals. Despite these predictions, prices during the Chuseok season may fluctuate due to increased quotes in other sectors. Moreover, the slaughtered animal numbers are expected to rise by over 6% YoY in 2024, with a significant growth in slaughtered cows, signaling potential challenges in the cattle market.

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