The global beef market presents a dual narrative, characterized by contracting production and high prices in the United States (US) versus increasing production and lower prices in the Southern Hemisphere, as outlined in Rabobank's Q4 global beef report. While the US experiences strong consumer demand amid potential weakening, cattle and beef supplies diminish, resulting in North American cattle prices remaining high. However, in Asia, weak demand and elevated inventory levels persist. The Southern Hemisphere production centers, particularly Australia and Brazil, see continued growth, yet global beef production is anticipated to decline by 1% year-on-year (YoY) in 2023.Resultantly, Southern Hemisphere countries continue to experience stable or decreasing prices, with Australian prices notably dropping by 28% since June. Despite geopolitical tensions in the Middle East, the impact on global beef trade is expected to be minimal, with the conflict's scope and regional import volumes being relatively small. This dual-market dynamic is expected to continue into 2024.
Although it predates the United States Department of Agriculture's annual cattle inventory count by nearly two months, preliminary data expects a 1.5% to 3.5% decline in the Jan-24 US cow herd, signaling potential for robust cattle prices. This early insight is based on ten months of beef cow slaughter data, revealing a historical link between slaughter rates and the following year's herd size. While factors like heifer additions and data revisions also impact future inventory, the culling rate has consistently aligned with January beef cow numbers. By the end of Oct-23, 10% of the initial beef cow herd had been culled, down from 11% the previous year, contributing to a 3.6% reduction in beef cow numbers at the start of 2023. The observed culling rate in 2011 led to a 2% decline in beef cow numbers in 2012. Since 2004, a January-to-October culling rate of 8.2% or higher has consistently signaled a subsequent year's reduction, with a rate exceeding 8.5% correlating to a 1.5% herd decline.
In Oct-23, Brazilian livestock farmers witnessed a significant improvement in marketing conditions for live cattle, leading to a robust recovery in price compared to Sept-23. Despite this improvement, the average price in October amounted to less than 75% of the average value recorded throughout 2022. This contrasts with the positive index of almost 15%, a historical high over the last 22 years, indicating a deviation of 40 percentage points (pp). If the average ruminant price had followed historical trends, it would have reached USD 73.61 on Oct-23, but it only reached USD 47.94. The average Nov-23 live cattle selling price is a little less than Oct-23 price. While historical trends suggest an 18.7% increase in Nov-23, rising almost 3.8 pp in the month, this year's trend indicates a minor decline, remaining below 74.8%.
In Oct-23, beef production in the United Kingdom (UK) increased to 82,100 metric tons (mt), reflecting a 14% rise from Sept-23, aligning with the heightened production efforts to meet the Christmas demand. However, production volumes still fell short of the levels recorded in the previous year, witnessing a decrease of 2,800 metric tons (mt). The surge in beef production is attributed to a growth in prime cattle slaughter, reaching 180,500 heads for Oct-23, a rise of 17,100 heads. Despite this increase, throughput levels for October remained approximately 3,900 heads lower compared to the same period last year.
Prime carcass weights remained relatively stable for October, showing a slight reduction of 0.6 kg on average. Throughout the year, carcass weights have generally been lighter despite improved grass growth, with some reports indicating adverse weather conditions affecting grazing.
In Oct-23, cull cow slaughter increased to 64,000 heads, marking a notable rise of 14,400 heads (+29% MoM) compared to Sept-23, although it remained -4.6% YoY. The pricing of cows has been adversely affected by diminished demand for processing beef during the summer, a trend mirrored in the European Union (EU). Furthermore, recent prices are likely influenced by the seasonal surge in slaughter activities preceding housing, adding additional pressure on cow prices.
Cattle prices in Australia have experienced a decline attributed to the widespread drought, resulting in the devaluation of 29 million heads of cattle and 79 million sheep. The roughly 500,000 heads of cattle and 2.5 million sheep and lambs slaughtered monthly now hold a diminished value, estimated at USD 491.6 million (AUD 750 million) less than before the onset of falling prices, as calculated based on Meat & Livestock Australia (MLA) data by Reuters.
Although November rains alleviated immediate drought concerns and contributed to a slight price improvement, the El Niño weather pattern's forecasted impact suggests a slower recovery for the herd. Many farmers, faced with financial strain due to rising interest rates and escalating costs of essential commodities, are selling animals at reduced prices, with some resorting to shooting unsellable sheep. Despite the challenges for farmers, the decline in livestock prices has relieved Australian households grappling with high inflation, evidenced by a recent 20% reduction in lamb prices by a leading supermarket chain