W22: Beef Update

In W22 in the beef landscape, Rabobank forecasts global beef supplies to remain balanced over the next year, despite US cattle prices increasing to historic highs. The decline in beef production and strong consumer demand led to a record increase in prices for cattle in the US. However, this decline is offset by increased production in Brazil and Australia. Brazil and Australia are planning to increase their export volumes due to the expansion of production in the face of unchanged or declining domestic consumption. The main beef shipment destination is China, which at the end of 2022 lifted COVID-19 restrictions. However, there are also concerns about a possible slowdown and subsequent reduction in Chinese imports in Q2 and Q3 of 2023 due to the slow pace of beef market recovery. Rabobank also notes that the further growth of Argentine beef exports largely depends on the results of the presidential elections, which will be held in October 2023. Opposition parties support freer markets and the lifting of protectionist measures such as export restrictions.

Tridge’s analysis indicates that EU beef prices (adult male, indicative) in W20 traded at USD 5.41/kg, down 0.4% WoW, and 0.5% MoM, the lowest level in 6 months. This was the ninth weekly decline in the last 14 weeks when prices had reached a record high of USD 5.54/kg. However, prices remain relatively high in most major beef-producing EU countries, with the exception of Germany, where declining meat demand seems to be worsening. Although EU beef prices remain higher YoY, as expected, the current mark represents the lowest increment so far into 2023, at 1.7% YoY. Tridge expects EU beef prices to remain relatively high throughout 2023 due to lower domestic production expectations as a result of lower cattle slaughter. Also, German beef demand is expected to continue declining throughout 2023 and is likely to more than offset the lower supply in the EU.

Australian cattle yarding in May 2023 totaled 247.23K heads, up 51% YoY and the highest since March 2020, with continued supply from the herd rebuilds. Australian throughput through the indicators has been consistently high since the April public holidays, which is placing some pricing pressure on the market. This is being reflected in the Australian processor cow indicator which regained USD 0.12 WoW and 26% since April 18th. Australian feeder prices are seeing a similar trend, with prices easing 13% in the same period. As noted in previous weeks, the continued supply and consistently filled kill floor space at processors is impacting prices at the sale yards. These factors are increasing the impact of quality and finish on the Australian market with premiums being paid for stock with weight. Australian cattle slaughter dropped from the high volume registered in W21 to 116.53K heads but is still up 20% YoY. In the first five months of 2023, Paraguayan cattle slaughter totaled 826.18K heads, a decrease of 7% YoY. Similarly, in the January-May period, Paraguayan cattle slaughter volume reached 202.06K MT, down 29% YoY. At the performance level, the slaughter weight until May 2023 was 244kg, a slight positive variation, compared to the same period in 2022 when the yield was 241kg. Specifically in May 2023, Paraguayan cattle slaughter totaled 204.06K heads, which comprised 31.07K steers, 74.25K bulls, 51.99K cows, and 46.76K heifers for a volume of 49.81K MT.

ABRAFRIGO reports that, in the January-April period, Brazilian beef exports totaled 630K MT, valued at USD 2.882M, down 12% in volume and 28% in value compared to the same period in 2022. The average beef price dropped in the period from USD 4,586/MT to USD 4,574/MT, down 20%. The drop in Brazilian beef exports can be largely attributed to a decrease in shipments to China, declining 20% in volume and 41% in value. The other destinations with decreases in Brazilian beef imports were the US, Chile, and Egypt. The decrease in Brazilian beef exports was due to the case of mad cow disease detected in Pará, on February 23rd, which led to the suspension of Brazilian beef exports for practically a month. In W21, Brazilian slaughterhouses showed little willingness for acquisitions, strongly affecting ranchers' deals with live cattle. The average weekly price stood at USD 52.43 per arroba of live cattle, down 3.6% WoW and 17.8% YoY. Meanwhile, the average price in May 2023 dropped to USD 54.07 per arroba of live cattle, a decrease of 6.8% MoM and 17.5% YoY.

In the 12 weeks to April 16th, UK frozen beef sales increased slightly by 1.8% YoY, accounting for 12.7% of total beef volumes. Growth in UK frozen beef was driven by ready meals and added-value products, with purchases rising by 8.8% YoY, and slowly increasing over the last 18 months. However, UK sales of processed frozen beef, frozen primary beef, and frozen mince dropped YoY, down 5.4%, 24.2%, and 25.3%, respectively. HMRC data indicates that YTD UK frozen beef imports totaled 17.55K MT, with Q1 imports dropping by 4.36K MT, down 19.9% YoY and on the 5-year average. This is attributed to the YoY decline in beef imports from Ireland, the Netherlands, and France. Lastly, in the January-April period, Ukrainian frozen cattle exports totaled 7K MT, valued at USD 27.7M, with shipments mainly destined for China (68.3%), Azerbaijan (10.6%), and Uzbekistan (7%). In April 2023, Ukrainian frozen cattle shipments amounted to 2.3K MT worth USD 7.1M. Meanwhile, in the first four months of 2023, Ukrainian frozen cattle imports amounted to 566MT, valued at USD 2.8M, with shipments mainly sourced from Lithuania (37.4%), Brazil (22.8%), and Austria (19.8%). In April 2023, Ukrainian frozen cattle imports reached 197MT worth USD 1.2M.