W23: Beef Update

In W23 in the beef landscape, the USDA adjusted upwards its expectations for 2023 US beef production to 27.086 billion lbs, up 165 million lbs compared to the May projection. This is attributed to higher US slaughter rates, with an average steer price of USD 171.70 per hundredweight, up USD 5.20 MoM, slightly higher consumption, and steady trade numbers. For 2024, the USDA expects US beef production to reach 24.795 billion lbs, up 50 million lbs from the previous estimate due to higher placement expectations, with an average steer price of USD 180 per hundredweight, USD 8 higher. The Dutch consumer price index (CPI) for beef and veal ended in Mar-2023 at 142 points (2015=100) and was at a similar level since Nov-2022, but almost 1 point lower than the highest level reached in Aug-2022. The consumer price index was 25% higher in Mar-2023 than in Mar-2021. The price index ex-meat processing (PPI) ended at 164 points, a slight increase of 1% since Nov-2022. During this period, prices for Dutch ex-meat processing rose slightly in both the domestic and foreign markets. The PPI was 51% higher in Mar-2023 than in Mar-2021. The Dutch farm-gate price index reached 165 points in Mar-2023, a small increase compared to the previous period. Between Oct-2022 and Feb-2023, the Dutch ex-farm index fluctuated between 162 and 163 points. Prices of ex-farm were also relatively high in 2022/23 since prices in Mar-2023 were 55% higher than in March 2021. The total number of Dutch cattle slaughters in the first months of 2023 was slightly higher than in the same period in 2021 and 2022. The main reason for the Dutch beef price increases is market disruptions due to the Russia-Ukraine war. Already in the run-up to this conflict, the prices of energy and feed rose enormously. The market disruptions caused by the Russia-Ukraine war in 2022 followed the disruptions during the corona pandemic in 2020/21 when ex-farm prices actually reached a low level.

In the Jan-May period, Australian frozen meat shipments amounted to 384.37 thousand mt, up 20% compared to the same period in 2022 when 319 thousand mt were registered. In May-2023, Australian beef exports totaled 91.48 thousand mt, up 27% MoM and 13% YoY. So far in 2023, Australian beef exports were mainly destined for China, with shipments totaling 79.37 thousand mt, up 33% compared to 2022. Furthermore, for the second consecutive month, China was Australia's largest volume market, with 19.57 thousand mt (80% frozen meat), an increase of 17% MoM and 40% YoY when China was being heavily supplied by the US and Brazil. According to Australia's National Livestock Reporting Service, Australian beef slaughter in May-2023 was by far the highest of 2023, with weekly volumes of up to 115 thousand cattle, the highest on record since 2021. There is a strong increase in the supply of Australian cattle ready for slaughter.

Tridge’s analysis indicates that, in 2023, the Spanish cattle sector expects herd numbers, slaughter rates, and beef production to decline. Indeed, the most recent numbers from the EU Commission point to Spain and Italy leading the long-expected European beef production decline so far in 2023. Similarly, the USDA in its June projection forecasts Spanish domestic cattle production to continue declining in 2023 on the back of higher input costs. The decline could be exacerbated by ongoing dry conditions in Spain, which is increasing feed costs. Higher production costs in H1 2022 accelerated cattle slaughter, leading to more beef production despite a lower average carcass weight. Nonetheless, cattle slaughter, according to the USDA, has trended down since late 2022. In 2022, beef production in Spain totaled 732 thousand mt, up 1.9% YoY. For 2023, Spanish beef production is expected to be around 700 thousand mt, a decline of 4.4% YoY. According to the USDA, 2023 will mark the fifth consecutive annual decline in EU beef production. High input costs remain one of the main causes behind the general decline in the industry in the EU. Moreover, there is ongoing uncertainty over the implementation of new environmental restrictions, which are likely to further disincentivize cattle herd growth.

During W22, Brazilian deals with live cattle continued to present fragile disputes between ranchers and slaughterhouses. As a result, after obtaining a slight appreciation in the sale of cattle at the opening of the week, cattle ranchers absorbed a sharp drop on the second day of business (May 30th), and even with a recovery in the following days, they ended the period absorbing a 2% WoW drop. The result was an average weekly price of USD 50.76 per arroba for live cattle, down 4.5% WoW and 21.8% YoY. The accumulated average price of the arroba of fat cattle at the beginning of June reached just USD 50.61, a decrease of 6.7% MoM and 22.6% YoY. As of the fifth month of 2023, Paraguay’s beef exports totaled 128.33 thousand mt, valued at USD 612.7 million, an increase of 1% in volume but down 10% in value compared to the same period in 2022. According to SENACSA, Paraguayan beef shipments in the Jan-May period were mainly destined for Chile, Taiwan, Brazil, Russia, Maritime Supply, Vietnam, Israel, Uruguay, Italy, and Kuwait. Lastly, in the first five months of 2023, Uruguayan meat exports totaled 245 thousand mt, valued at USD 1.055 billion, down 12.5% in volume and 25% in value compared to the same period in 2022. At the moment, the average price of meat stands at USD 4,112/mt, a decrease of 11% YoY. Uruguayan meat shipments were mainly destined for China (-37%), the US and Canada (+15%), the EU (-15%), Mercosur (-17%), and Israel (-40%). Specifically, Uruguayan beef exports amounted to 189 thousand mt, valued at USD 800 million, a drop of 17.5% in volume and 25% in value. In Jan-May 2023, the average export revenue for Uruguayan beef stood at USD 4,409/mt, down 13% compared to USD 5,088/mt registered in the same period in 2022. It is noteworthy that the average price strengthened in the week ending May 27th at USD 5,036/mt.