W19: Beef Update

In W19 in the beef landscape, the FAO indicates that the average meat price index in April was 114.5 points, up 1.3% MoM, but down 6.1% YoY, with beef prices increasing due to a reduction in the supply of slaughter cattle, especially in the US. In W19, the Mercosur countries - Brazil, Argentina, Uruguay, and Paraguay - saw a downtrend in the prices of slaughter cattle, with the Mercosur Steer Index dropping 8 cents to USD 3.56/kg carcass, a decrease of 21 cents in just three weeks. The USDA reports that in the week ending May 4th, US net beef sales totaled 16.6K MT, down 18% WoW, but up 16% from the four-week average, with main buyers being South Korea (4.4K MT), Japan (3.7K MT), Canada (3.1K MT), Mexico (2.1K MT), and Taiwan (1K MT). US beef shipments in W19 reached 14.8K MT, a drop of 22% WoW and 11% from the four-week average, with exports mainly destined for South Korea (4.3K MT), Japan (3.1K MT), China (2.1K MT), Canada (1.3K MT), and Mexico (1.3K MT). Tridge’s data analysis indicates that during the last week of April, Dutch beef wholesale prices (Heifer carcass, O2 grade) increased by 8.5% WoW and 10.6% MoM to a fresh 31-week high of USD 4.57/kg. Beef prices have had an upward trend since early April due to ongoing concerns over potential lower domestic production, as the European Commission raises efforts to close down livestock farms in the Netherlands to reduce nitrogen emissions.

In Poland, following the long weekend at the start of May, the prices of cattle tended to be stable, with some traders even slightly increasing prices, especially in post-slaughter valuation. In W19, the purchasing price of Polish bulls in class R amounted to a high of USD 5.33/kg, averaging USD 5.17/kg, while in class O the top rate was USD 5.18/kg, with an average of USD 5.05/kg. Polish Live-weight bulls were traded at a high of USD 3.25/kg, averaging USD 3.01/kg. Prices offered for Polish heifers in the post-slaughter settlement in class R were at a maximum of USD 5.54/kg, with an average of USD 5.35/kg, and heifers in class O at a high of USD 5.30/kg, averaging USD 5.16/kg. Live-weight heifers were sold for a maximum of USD 3.01/kg, averaging USD 2.77/kg. Poland is currently conducting a campaign with the aim of accepting applications for direct payments and eco-schemes, involving the need to keep cattle for a certain period of time on the farm. This action is expected to result in a reduction in supply of cattle, and in turn, an increase in purchase prices.

In W18, Brazilian slaughterhouses showed little willingness to purchase live cattle, aiming at greater pressure on prices and obtaining favorable conditions. As a result, the weekly average price of live cattle of arroba declined by 4.4% WoW and 20.1% over the same week in 2022. The accumulated average price at the beginning of May came to just USD 53.92, down 6.8% MoM and 17.5% YoY. W19 experienced a more active retail trade due to the full restoration of the purchasing power of active and retired workers. It is expected that the greater or lesser movement in beef turnover will dictate the pace of business with livestock farmers. Brazilian April beef exports, in natura and processed products, totaled 140.71K MT, valued at USD 626.9M, down 25% YoY in volume and 43% YoY in value, with the average price standing at USD 4,455, down 24.7% YoY. This general downtrend is attributed to the decline in imports from China, as well as a drop in sales to other important destinations, such as Chile and Egypt. ABRAFRINGO reports that in the January-April period, Brazilian beef exports reached 639.6K MT worth USD 2.882B, a drop of 12% in volume and 28% in value compared to the same period in 2022, with the average price settling at USD 4,506, a drop of 18% over the same period in 2022.

SECEX reports that Brazilian beef exports in W1 of May 2023 totaled 42.8K MT, valued at USD 216.712M. The daily average shipments in W1 of May stood at 10.7K MT, an increase of 75.41% WoW and 54.5% compared to the same period in 2022. Meanwhile, the average price of Brazilian beef exported in W1 of May was USD 54.178M, an increase of 21.2% compared to the price observed in May 2022. After the poor performance of exports with the suspension of China due to mad cow disease in Pará, the pace of beef shipments returned to the levels observed before the confirmation of the case. CONAB estimates Brazilian beef production in 2023 to reach 9.065MMT, an increase of 6.5% YoY, becoming the second largest volume ever produced, only 1.6% lower compared to the record 9.215MMT reached in 2018. However, in January-April 2023, in the Brazilian domestic market, the prices of live cattle ready for slaughter showed a considerable drop of 15.8% compared to the same four-month period in 2022, while exports showed a drop of almost 14%.

DATAGRO indicates that, in the January-April period, Argentine cattle slaughter reached just over 4.7M heads, a growth of 12.3% compared to the same period in 2022 and the highest since 2019. In April 2023, Argentine slaughtered cattle reached around 1.17M, up 11.4% YoY. This follows a severe drought that Argentina experienced in recent months but managed to remain competitive in the international market with good production flows and competitive prices in US dollars. According to Victor Tonelli, livestock analyst, the drought experienced in Argentina affected almost 80% of the Argentine bovine stock and is expected to lead to 1.5M unproductive bellies, resulting in a reduction in weaning by 6-8%. Therefore, in 2024, Argentine calves are expected to drop by around 1.3M heads. The livestock analyst adds that the increase in the volume of unproductive bellies led to oversupply in the beef market and put pressure on cow slaughter, growing by 27% YoY in Q1 2023. He also noted that as of December 2022, the Argentine calf stocks reached 15.4M heads, one of the highest in a decade. This situation forced producers to liquidate them with the aim of creating a better balance between supply and load, causing a price drop of 5-10%. Lastly, Uruguayan beef exports in April 2023 totaled 21.81K MT, down 37% MoM and 36% YoY. This was driven by the decline in shipments to China, one of the country's main trading partners, plummeting 37.7% MoM to their lowest level in the last 32 months.