W3 Beef Update: US Quotas and Devaluation Drive Mercosur Steer Prices, Mexico's Beef Trade Sees 18.5% Import Surge to Offset 11.1% Export Dip

US Import Demand Drives Revised 2024 Beef Exports, Despite Regional Production Dips

Global beef production for 2024 is revised upwards by 1% from Oct-23's forecast to 59.5 million metric tons (mmt), driven by positive adjustments for the US and Australia. The upward revisions in these regions offset declines anticipated in Argentina and the EU. Despite the overall increase, US production is still expected to decline year-on-year (YoY). Australia's herd liquidation and increased slaughter levels, partially offset by lower carcass weights, are expected to maintain production to previous year's levels. Argentina's production is revised downwards due to tighter cattle supplies, a smaller calf herd in 2023, and drought-induced liquidation. The EU's production is revised downwards due to lower slaughter levels, reflecting multi-year herd contraction and sluggish consumer demand. Brazil's production forecast remains unchanged.
Global beef exports for 2024 are revised upwards by 1% from October's forecast to 12.1 mmt. Upward revisions are applied to Brazil and Australia due to ample production and robust global demand. These leading exporters are expected to benefit from increased US import demand driven by declining domestic production. However, Brazil's shipments will be constrained by US beef import quotas, while Australia enjoys unlimited and duty-free access under the Free Trade Agreement (FTA) between the US and Australia. China's demand forecast is slightly improved despite slower expected economic growth.

Mercosur Steer Prices Edge Higher, Driven by Argentina and Regional Devaluation

The average steer price in the Mercosur region experienced a slight upward trend in W2, driven by increases in Argentina, Paraguay, and Uruguay, partially offset by a decline in Brazil. The Faxcarne Mercosur Steer Index rose 4 cents per kilogram (USD 0.04/kg) to reach USD 3.25/kg carcass weight.

The most significant price movement was observed in Argentina, where the devaluation of the parallel exchange rate impacted livestock prices in USD terms. This led to a rise in Argentine peso-denominated export steer prices, translating to a USD 3.65/kg carcass weight valuation (including the 9% meat export tax). In contrast, Brazil witnessed a price dip for fat boi steers, declining 4 cents (USD 0.04/kg) to USD 2.99/kg carcass weight. This decline is attributed to weakening internal demand heading into the latter half of the month. Paraguayan slaughter male prices increased to around USD 3.50/kg carcass weight, while the Uruguayan market remained stable with similar price references to W1. While Argentina's devaluation boosted export steer prices, internal demand weakness in Brazil and a stable Uruguayan market indicated differing trends across the region.

Mexican Beef Imports Surge, Exports Dip, While Live Cattle Exports Boom

Mexico's 2023 beef trade presented a nuanced picture of rising domestic demand, adjusted export flows, and a flourishing live cattle market. Mexican appetites drove a significant 18.5% YoY increase in total beef imports, exceeding USD 1 billion in spending. The US remained the primary supplier, followed by Canada and Nicaragua. Notably, Australia emerged as a new source, quadrupling its beef exports to Mexico. While domestic consumption fueled import growth, Mexican beef exports experienced an 11.1% YoY decline in volume and a 6% YoY decrease in revenue. Lower shipments to key markets like the US, Asia, and Canada, coupled with a slight average price drop, contributed to this adjustment.

In contrast to the mixed import and export trends, live cattle exports boomed in 2023. Mexican ranchers sent 40% more heads to the US compared to 2022, resulting in an 83% YoY revenue increase. This surge was driven by a decreasing US herd size, influenced by factors like liquidation, production costs, and climate challenges. Furthermore, the average price per animal grew by 30% YoY, highlighting the enhanced profitability of live cattle exports for Mexican ranchers.

Despite declining beef exports, the combined picture of beef and live cattle shipments yielded a positive trade balance for Mexico, reaching USD 1.56 billion and exhibiting a 2.4% YoY increase. This underscores the crucial role live cattle exports played in offsetting the dip in meat shipments and securing positive returns for Mexican ranchers. Mexico's 2023 beef trade revealed a dynamic and evolving landscape. While robust domestic consumption is likely to sustain import demand, the success of live cattle exports presents a promising alternative for Mexican ranchers to navigate the shifting currents of the beef market.