W35: Beef Update

In W35 in the beef landscape, Safras and Mercado indicate that the Brazilian cattle market experienced a bleak scenario in Aug-23 characterized by a significant decline in prices. Safras and Mercado attribute this situation to the abundant beef supply in Brazil and consumers' challenges in affording high-value products like beef. Safras and Mercado also note that external factors played a role, with a drop in export revenue in United States (US) dollars for the industry. This was primarily due to China's economic crisis, contributing to the downward pressure on prices. Experts anticipate a less pronounced decline in prices in Sep-23. However, if the downward trend continues, it could further erode livestock farmers' profitability. This situation will likely affect future cattle supplies as investments in the sector diminish over the short and medium term.

Safras and Mercado also highlight that the Brazilian wholesale beef market registered declining prices throughout Aug-23, signaling sluggish consumption. The hind quarter was priced at USD 3.30 per kilogram (kg) at the end of Aug-23, a decrease of 4.12% compared to the USD 3.44/kg traded at the end of Jul-23. The forequarter was priced at USD 2.49/kg at the end of Aug-23, a 2.77% drop from the USD 2.56/kg recorded at the end of Jul-23.

High cattle slaughter volumes continued in Argentina reaching 1.24 million heads, a modest decline of 3.8% month-on-month (MoM), with the most significant drops seen in the steer (-10% MoM) and heifer (-6% MoM) categories. Notably, the high cattle slaughter does not fully account for the cattle price surge observed since late Jul-23, when business operators argued that the shortage was the reason for the skyrocketing prices. The cattle price spike during Aug-23 in Argentina could be attributed to the price recovery after months of lagging behind inflation, the devaluation of the Argentine peso, and heightened uncertainty in the market.

Female cattle represented 47.4% of the total slaughter, indicating a stable mother stock. However, this does not guarantee a strong calf supply in 2024 due to unfavorable conditions in 2023 attributed to drought. A more moderate cattle slaughter is anticipated in the coming months, particularly towards the end of 2023, as feedlots are emptied. This reduction in farm supply is expected to deepen in 2024 due to a limited calf number for fattening. Also, favorable weather conditions may further delay livestock reaching the market for sale to meatpackers.

The United States Department of Agriculture (USDA) estimates Japan's beef cattle census at 3.92 million in 2024, a decrease of 1.26% year-on-year (YoY). This drop is attributed to increased dairy cow slaughter and the absence of live cattle imports in 2023. Furthermore, Japan is expected to import nearly zero live cattle in 2023 and 2024, primarily due to trade challenges, including the weak Japanese yen and high prices.

Lastly, the USDA forecasts a stable beef consumption in Japan for 2024. Rising inflation impacts retail demand, prompting consumers to consider prices more carefully when making product choices. As a result, consumers have shifted towards less expensive options like pork or chicken. While tourism and foreign visitors are expected to boost beef consumption in the hotel, restaurant, and institutional sectors in H2-2023 and into 2024, inflation is expected to temper this growth. This situation is predicted to result in flat total beef consumption compared to 2022. The USDA also expects steady beef imports in 2024, with high import prices and a weak Japanese yen acting as dampeners on demand.

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