W32: Beef Update
In W32 in the beef landscape, the Food and Agriculture Organization (FAO) reports that the meat price index averaged 117.8 points in Jul-23, a decrease of 0.4 points (0.31%) compared to Jun-23. The global bovine meat price month-on-month (MoM) decline can be attributed to the rise in exportable supplies in Oceania. This aligns with weakened import demand in Asian markets due to rising stock levels and decreased domestic sale interests.
Tridge’s analysis indicates that Brazilian beef export volumes (excluding derived products) reached 161 thousand metric tons (mt) in Jul-23, a decrease of 17% MoM and 4% year-on-year (YoY). This is the lowest beef shipment for July in four years. Also, the average Brazilian beef export price fell by 6% MoM and by 28% YoY to USD 4.74/kilogram (kg), the lowest level since Mar-21. Unexpectedly, in comparison to previous months, the export volume decline primarily resulted from reduced exports to China, dropping 16% YoY (18 thousand mt). Moreover, exports to Egypt and Indonesia plunged by 60% YoY (3.4 thousand mt) and 100% YoY (3.3 thousand mt), respectively.
On the contrary, Brazilian beef exports to Chile surged 97% YoY (6.1 thousand mt), while shipments to Russia registered a significant 396% YoY rise (6.9 thousand mt). Although exports to the United States (US) and Libya increased by 78% YoY (1.5 thousand mt) and 156% YoY (1.5 thousand mt), respectively, these gains were insufficient to counterbalance the Chinese decline. The significant drop in both volume and prices towards China implies weakened demand, especially considering China's yuan value dropped 16% against the Brazilian real. The slowed Chinese economy and diminishing consumer confidence might indicate a fading post-pandemic boost, potentially leading to more dependence on domestic beef.
According to the ESALQ/BM&FBovespa calf indicator for Nelore animals aged eight to 12 months in Mato Grosso do Sul in Brazil, calf prices experienced an 8% decline from Aug-22 to Aug-23. This decrease is attributed to a heightened supply from technological advancements in production methods, particularly in genetics and insemination, from 2020 to 2022. This led to increased productivity. Beef producers also invested more in the sector due to robust bovine arroba trading levels and strong global demand. Moreover, there were noticeable adult cows and heifers retention between 2020 and 2021, aimed at production recovery.
Lastly, Argentina's beef exports increased by 8% in the first half of 2023 despite restrictions on certain cuts. This is in contrast to beef export declines in Brazil (-5%), Uruguay (-7%), and Paraguay (-12%) in the Mercosur region. However, the increased export advantage is offset by the lowest price for Argentine meat in the Mercosur region. The Argentine beef export price stood at USD 4,843/mt over the last 12 months, down compared to USD 4,923/mt in Brazil and USD 5,393/mt in Uruguay. Paraguay’s beef export price per ton stood at USD 4,798/mt. There were substantial price drops across the Mercosur markets in the last 12 months. This lower foreign currency inflow is attributed to restrictions on certain cuts for domestic consumption, market access hurdles, European demand fluctuations, and growing dependence on the Chinese market. The doubled exchange rates and export duties further reduce the actual beef value, leading to industry and rancher impoverishment amid deepening macroeconomic challenges.
