W24: Beef Update

In W24 in the beef landscape, the average price of cattle for slaughter in Mercosur continues to decline, with the Mercosur Steer Index losing USD 0.04, dropping to USD 3.29/kg carcass, the lowest level since the beginning of 2023. Prices in Brazil fell for the tenth consecutive week in the Brazilian Real, while in US Dollar terms the average of the main exporting states lost USD 0.02 to USD 2.89/kg carcass. The firmness of the Brazilian Real, appreciating 0.9% WoW, prevented the falls from being intense. In Argentina, the price of steers for export remained stable in the Argentine Peso and lost USD 0.06 to USD 4.06/kg. In Uruguay, the trend is also downward, with the reference for the special steer being USD 3.90/kg, a drop of USD 0.10 WoW. In Paraguay, steer prices remained unchanged at USD 3.10/kg.

Tridge’s analysis indicates that Brazilian beef exports in May-2023 amounted to 168 thousand mt, up 53% MoM and 11% YoY, reaching the highest level on record for the month of May. The YoY increase was the first after three months of ongoing double-digit declines, which were mostly caused by the temporary suspension of beef exports from Brazil to China from late February through late March due to an isolated and atypical mad cow disease case. The export ban also included other significant markets such as Russia, several countries in the Middle East, and Southeast Asia. In some countries, the ban lasted until April or May. Thus, some of the recent gains in export volume are also a result of renewed trade with some of these countries, in addition to China. The considerable recovery in volume also came with a 7% MoM rise in prices, which reached a fresh six-month high of USD 5.1/kg. The sharp increase in volume, coupled with a rise in prices, led export value to rise by 63% MoM to a seven-month high of USD 859 million. Tridge expects Brazilian beef export volume to continue recovering in June, with increases expected to come from China, the EU, and the Middle East. Also, Tridge’s data analysis indicates that, in W24, beef wholesale prices (carcass, rear) in Pernambuco in Brazil stood at USD 3.87/kg, down 12% MoM and 18% YoY, the lowest level since Sep-2020. Furthermore, beef entry prices in Pernambuco (carcass, front) fell to fresh near 3-year lows. Higher supply derived from more cattle slaughter, in addition to ongoing consumer substitution of beef for cheaper protein alternatives, are driving prices lower. However, moving forward, the downside seems limited. Current low prices will eventually incentivize domestic demand and push prices higher. In the meantime, Brazilian beef export prices experienced a recovery in May, signaling higher demand abroad, which will eventually translate into higher domestic markets.

ABRAFRIGO indicates that, in the first five months of 2023, Brazilian beef exports amounted to 840.42 thousand mt, valued at USD 3.847 billion, down 8% in volume and 24% in value compared to the same period in 2022. The average price obtained in the period was USD 4,578/mt, down compared to USD 5,593/mt in Jan-May 2022. Brazilian beef shipments in the Jan-May period were mainly destined for China (381.45 thousand mt), the US (93.31 thousand mt), Chile (34.45 thousand mt), Egypt (38.58 thousand mt), Hong Kong (43.44 thousand mt), and the UAE (22.84 thousand mt). CEPEA reports that in Brazil, prices of all products in the cattle chain dropped steeply in May-2023 as the quotations of calves (8-12 months old), slaughtered cattle, and beef (sold in the wholesale market) dropped steeply in the Brazilian market. The drops are linked to a high animal supply at the end of the season. Higher cattle supply in 2023, mainly of females, results from both the investments made by the sector in recent years and also the weaning period. On May 31st, the price of calves traded in the state of Mato Grosso do Sul in Brazil closed at USD 465.61/head, down 9.8%, with the calf Index standing at USD 477.23/head, 6.1% lower MoM and 12.5% YoY, and the lowest monthly average since Nov-2019. Calf devaluations in the past couple of years put some pressure on fed cattle prices. Despite the high exports of Brazilian beef, higher animal supply leads to lower fed cattle prices. On May 31st, fed cattle closed at USD 50.91/15kg arroba, a decrease of 10.4% and the lowest nominal level since early Sep-2020. The monthly average price for beef carcass in May closed at USD 3.80/kg, down 5% MoM and 10% YoY.

In W24, Irish factory quotes for all types of cattle dropped by a further USD 0.055/kg as the downward price trend in the Irish beef trade continues. DAFM reports that the average all-in price paid for R-3= bullocks (steers) fell by USD 0.04/kg from USD 6.01/kg to USD 5.97/kg in May-2023. In 2022, beef prices peaked in late-May/early June and began to decline from there before bottoming out at USD 4.92/kg in late October and beginning to increase again in mid-November. In 2023, prices have been declining since mid-May and factory quotes are now back to early January levels. Lastly, FranceAgriMer indicates that, in Q1-2023, French beef imports increased by 7% in volume and 18% in value compared to Q1-2022. 85% of France’s beef imports are sourced from the EU, led by the Netherlands (23.6 thousand mt), Ireland (17 thousand mt), Germany (11.3 thousand mt), and Poland (10.4 thousand mt). 25% of France’s beef imports are sourced from the UK and Brazil. Since French beef prices are generally higher than those of neighboring countries and slaughters have fallen sharply due to shortage of animals for slaughter, French beef exports fell by 16.8% in Q1-2023. However, this sharp drop can also be partly explained by the drop in transit volumes from the UK to Northern Europe. In value terms, the decline was only 2.9%, attributed to higher prices.