W38: Beef Update

In W38 in the beef landscape, Tridge’s analysis highlights a growing structural unprofitability within the European Union’s (EU) cattle sector. This situation is exacerbated by soaring input costs and labor shortages, making the industry less appealing to new entrants. Experts predict a continued decline of the EU's cattle herd by 0.8% year-on-year (YoY) in 2023 and 0.54% YoY in 2024. EU beef production is expected to fall by 3.3% YoY in 2023, with a 0.9% YoY drop forecasted for 2024. These downward trends align with low cattle slaughter rates, influenced by factors like high feed prices. EU beef consumption is also declining, with an estimated 1.6% YoY plunge in 2023 and an additional 0.6% YoY drop in 2024, primarily due to high beef prices compared to pre-pandemic levels, despite recent price recoveries. The EU's beef sector also faces challenges from regulatory demands, changing preferences, and inflationary pressures, affecting both supply and demand dynamics.

The Paraguayan steer price continued trending downwards to USD 2.80 per kilogram (kg) in W38, the lowest value in the Mercosur region. This is a six-week price drop, falling by USD 0.75 over the period, with a USD 0.05 decline in the last seven days. Uruguayan steer was quoted at USD 3.21/kg after dropping by USD 0.08U due to reduced business activities, with a continuous USD 0.50 price decline in nearly two months. Despite experiencing dollar exchange rate devaluation in the past four weeks, Argentina maintained the highest regional value of USD 4.25/kg, with a USD 0.03 week-on-week (WoW) drop. Meanwhile, Brazilian steer prices increased by USD 0.16 to USD 2.89/kg, a 4% WoW surge due to the Brazilian real appreciation.

The United States Department of Agriculture (USDA) expects Uruguay’s beef production to reach approximately 575 thousand carcass weight (cwt) in 2024, with a slight growth in average cwt. This positive outlook is primarily due to increased culling and favorable weather conditions. Abundant calf production in recent years, coupled with reduced cattle exports in 2022, is anticipated to result in a robust cattle supply for slaughter in 2024. Uruguay's farms have improved efficiency, leading to increased calf weaning rates.

The USDA estimates Uruguayan beef exports at around 467 thousand metric tons (mt) in 2024, a 4% YoY increase. China is expected to remain the primary destination, accounting for over 50% of shipments. The United States (US) and the EU are also emerging as significant markets. Uruguay is actively working on expanding into Southeast Asian markets, including Indonesia, Vietnam, Thailand, Malaysia, and the Philippines. Despite market fluctuations, Uruguay is positioning its beef industry for continued growth and diversification in the global trade.

Lastly, the USDA expects US beef production to reach 26.94 billion pounds (lbs) in 2023, approximately 40 million lbs lower than the Aug-23 projection. The USDA attributes this downward adjustment to the expected slow pace of fed cattle commercialization in Sep-23, partially offset by an anticipated increase in cow slaughter for the remainder of 2023. US beef production projection for 2024 remained unchanged at 25.2 billion lbs. The USDA expects US fed-steer prices to remain stable until the end of 2023, while feeder-steer quotes are estimated to rise during Q4-23 and Q1-24.

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