W21: Beef Update

In W21 in the beef landscape, the USDA reports that US cattle on feed as of May 1st amounted to 11.6M heads, down 3% YoY, and in line with pre-report estimates. The USDA also outlines that US cattle placements in feedlots during April totaled 1.75M heads, down 4% YoY, while marketing of fed cattle reached 1.70M heads, a drop of 10% YoY, and in line with market expectations. According to analysts, the relatively strong pace of US beef cow slaughter and relatively large placements of heifers in feedlots in 2022 and into early 2023 will likely yield a smaller YoY calf crop in 2023, tightening future cattle supplies. It will also likely lead to fewer US cows and bulls in the slaughter mix in 2024. Meanwhile, tighter US forage supplies heading into summer 2023 and lower feed prices will likely lead to larger placements of calves in feedlots. Therefore, the USDA forecasts 2024 US beef production to decline 8% from 2023 to 24.7B pounds. Furthermore, experts point out that 2024 is expected to mark the second year of lower US beef production following the record-large volume set in 2022 and is anticipated to be the lowest production year since 2015 when the sector began to rebuild following the drought of 2011-2014. The USDA indicates that US beef net sales in W21 totaled 18.3K MT, up 5% WoW and 15% compared to the 4-week average. Sales were primarily destined for Japan (5.5K MT), South Korea (3.8K MT), China (2.5K MT), Mexico (2.2K MT), and Taiwan (1.2K MT). In contrast, US beef exports amounted to 16.5K MT, down 10% WoW and 3% from the 4-week average, with shipments mainly destined for South Korea (4.7K MT), Japan (4.1K MT), China (2.3K MT), Mexico (1.4K MT), and Canada (1.3K MT).

ABS indicates that Australian cattle slaughter numbers have improved strongly across most states, in both QoQ and YoY perspectives. In Q1 2023, the eastern states, Queensland, New South Wales (NSW), and Victoria, accounted for 91% of the 202K head increase in slaughter compared with Q1 2022. Furthermore, ABS outlines that in Q1 2023, Australian beef production totaled 498.31K MT, up 15% YoY and the highest level nationally in two years. All states registered improvements, with Western Australia (WA) recovering its fall of 11% in production against Q4 2022 levels to increase 17% YoY. Again, the eastern states accounted for 91% of the YoY improvement. South Australian cattle numbers remained firm, although moving into the remainder of 2023, slaughter production is expected to lift in the state as facilities begin to become fully operational. According to CEPEA, Brazilian live cattle quotations for slaughter and replacement are expected to fall in May 2023. Experts indicate that the pressure on Brazilian arroba per kg prices is due to the increase in the supply of animals ready for slaughter, which is linked to investments made in previous years and to the end of the harvest and the worsening of pasture quality. On the demand side, some Brazilian slaughterhouses have reduced the pace of purchases of new batches for slaughter, indicating longer slaughter schedules. CEPEA also outlines that the devaluation of Brazilian arroba occurs more intensely than that verified for the replacement, a context that results in a worsening in the exchange ratio to the cattleman who does the rearing-fattening.

INEC indicates that Argentine beef shipments in April 2023 totaled 74K MT of bone-in beef, an increase of 10% YoY, with 80% of exports destined for China, valued at USD 145M. In the January-April period, Argentine beef sales totaled 300K MT of bone-in beef, valued at USD 894M, a growth of 14% in volume but down 15% in value compared to the same period in 2022, with 78% of total sales destined for China. The growth in Argentina’s export beef trade is attributed to a growing Asian demand due to the removal of COVID-19 restrictions, the drought experienced in Argentina forced more cow slaughter whose meat is destined for foreign markets, and in January 2022, there were few official authorizations. According to HMRC data, UK fresh and frozen beef imports in March 2023 reached 19.17K MT, an increase of 19% MoM but dropped by 2.78K MT YoY. The YoY drop was due to a decline in imports from Ireland and the Netherlands, and most notably from Germany where shipped volumes fell by 69.2% YoY. In the January-March period, UK imports totaled just 52.92K MT, a slight drop of over 5K MT, down 8.7% YoY and 9.5% compared to the 5-year average, which is higher than the expected trend of a 2% reduction in import volumes in 2023 as demand eases. Meanwhile, UK fresh and frozen beef exports in March amounted to 8.95K MT, an increase of 190MT MoM, with greater volumes destined for France (250MT) and Belgium (100MT). However, this was partially offset by exports to the Netherlands and Germany falling by 140MT each. Contrary to the MoM increases, UK beef exports dropped YoY, for the second consecutive month, with fresh exports totaling just over 6.24K MT, down 25.9% YoY, while frozen shipments reached 2.71K MT, down 40.2% YoY. In the January-March period, UK beef exports reached just 26.19K MT, down 17.3% compared to the same period in 2022 and a decrease of 10.2% in relation to the 5-year average.

In April 2023, Russian beef average prices, except for boneless meat, stood at USD 6.06/kg, up 0.4% MoM and 4.5% YoY, a price increase in eight consecutive months. Since the beginning of 2023, Russian beef prices have increased by 1%. The most expensive Russian beef in April 2023 was sold in the Central Federal District at USD 6.92/kg, while the cheapest was in the North Caucasus at USD 5.52/kg. In South Korea, in the aftermath of foot-and-mouth disease, which occurred in four years and four months, first-class Korean beef wholesale average prices increased from USD 9.97/kg on May 9th to USD 10.89/kg on May 19th, up 9.3% and surpassing USD 11.35/kg on May 16th. The sharp rise in Korean beef prices was largely due to a contraction in supply due to strengthened foot-and-mouth disease prevention measures. The South Korean government restricted the movement of cattle and closed small markets for up to 30 days in Cheongju and Jeungpyeong-gun in North Chungcheong Province, where the foot-and-mouth disease occurred, as well as in seven nearby cities and counties. Lastly, in the January-April period, Ukrainian live cattle exports totaled 7.9K MT, valued at USD 12.3M, with shipments mainly destined for Egypt (43.4%), Lebanon (38.7%), and Jordan (12.5%). In April 2023, Ukrainian live cattle shipment amounted to 1.8K MT, worth USD 2.7M.