Rabobank reports divergent sentiments in the global beef market, with the United States (US) witnessing high prices and reduced production, and the Southern Hemisphere experiencing growing production and lower prices. In the US, extended herd liquidation and the contractionary phase in Q4-2023 are expected to lead to decreased production, prompting heightened imports and diminished exports. Meanwhile, Australia and Brazil are anticipated to register improved exports as their production rises. These opposing trends in the cattle cycle, exacerbated by weather patterns, are reshaping beef trade dynamics, expected to persist into 2024.
Rabobank predicts a stable volume balance for major beef-producing regions, but adjustments will be necessary at the country level. The US is poised for a substantial shift, transitioning to a net-import position in 2023, with a further 4.5% year-on-year (YoY) decline in production and a 3% YoY drop in consumption in 2024. Australia and Mexico stand to benefit, with New Zealand gaining ground, albeit constrained by limited production. Brazil is anticipated to set a new production record in 2024, with a 1 to 2% YoY growth, supporting a 2 to 3% YoY increase in export volumes. Chinese imports are predicted to rise by over 5% YoY in 2024, driven by demand recovery in food service. Changes in consumer preferences in China, favoring value-for-money over premium products, are forecast to influence the beef market. Increased beef consumption in China will boost imports from Argentina, which are expected to surge by 5 to 7% in 2024.
The European Union’s (EU) deforestation-free product regulations in 2024 could impact beef import flows, especially as EU cattle numbers decline. This is expected to lead to a 1.5% YoY reduction in beef production in 2024. While the Middle East conflict is unlikely to impact the beef trade significantly, indirect effects could occur due to rising fuel and energy costs. Rabobank warns of potential margin squeezes in beef supply chains in 2024 as global economic recovery progresses slowly.
The Mercosur Steer Price Index stood at USD 3.10 per kilogram (kg) in W47, a USD 0.15 reduction compared to W46. This price index decline is attributed to a 21.5% devaluation sanctioned by the Argentine government for exporters, leading to a significant drop in the dollar reference for steer exports. The Argentine steer export price witnessed a USD 0.70 decrease to USD 3.47/kg, inclusive of the 9% tax on meat shipments. This negative adjustment brings Argentina closer to other regional benchmarks. In Brazil, a minor devaluation in the exchange rate caused the average value in the primary exporting states to decrease by USD 0.02 in W47, settling at USD 2.97/kg. In Campo Grande, the reference price dropped by USD 0.03 to USD 3.01/kg. Meanwhile, Paraguayan steer prices remained stable at USD 3.20/kg while Uruguayan steer increased slightly to USD 3.00/kg.
The Center for Advanced Studies on Applied Economics (Cepea) reports that Brazilian fed cattle quotations fluctuated in 2023, maintaining a lower trajectory than in 2022. The monthly averages for the Jan-23 to Sep-23 period have consistently fallen below those of the corresponding months in 2022, with the most significant price decline of -26% YoY recorded in Sep-23. This downward price trend is attributed to increased animal supply for slaughter and a corresponding rise in beef production in 2023. According to the Brazilian Institute of Geography and Statistics (IBGE), beef production reached a record of 6.39 million metric tons (mmt) from Jan-23 to Sep-23, an 8.37% increase over the same period in 2022 and a 4.5% rise compared to 2019.
Notably, there is a shift in Brazil’s productive cycle for 2023, characterized by a higher number of animals ready for slaughter than in 2022. Until Sep-23, the volume of slaughtered animals surged by 10.24% compared to Sep-22, totaling 24.42 million animals. The average yield stands at 262 kg in 2023, a marginal 1.71% decrease from the record observed in 2022. The diminished levels of fed cattle in 2023 could deter new farmer investments and lead to the slaughter of lighter animals, impacting the productive cycle in the upcoming years. However, a recent reduction in the supply of ready-to-slaughter animals, attributed to fewer animals confined between Nov-23 and Dec-23, has been noted. The holiday season is anticipated to boost beef consumption, and the robust pace of shipments is expected to reinforce potential price increases.