Global beef prices are expected to break records again next year, as demand for cow meat outweighs supply, a Rabobank report has claimed.
Rabobank said the beef market in Q3 had been characterised by a larger global supply, driven by the natural recovery of beef herds in Brazil, Argentina and Australia. According to the report, this was anticipated and linked with a relatively “lethargic” world economy, which has weighed on prices across the world.
For 2013, Rabobank is expecting to see global supply stick close to the levels seen in 2012 “with possible minor ups and downs being determined by the extent to which the increase in the southern hemisphere production will outpace the reduction in Europe and the US”, it said.
It is also expected that there will be another year of weak consumption on the back of the poor economy, which has been attributed to the prediction that world gross domestic product (GDP) will grow only slightly in 2013.
Live cattle prices in Brazil increased by 4% between October and November this year, which was because of a dry period and low supply of feed. Rabobank said: “Placements did not grow as much as anticipated in the face of high grain and fed cattle prices.”
Despite this, beef prices did not do as well as cattle values and rose by only 1%. However, even though prices had increased in Brazil’s live cattle, Rabobank pointed out that, even so, prices had fluctuated around 6% below last year’s levels.
Prices of live animals in Brazil are expected to remain at reasonable levels in 2013, according to the report, and first estimates indicate a rise in Brazil’s beef production of 3% above 2012 levels.
Weather in the US has been a large factor for the country’s beef trade, Rabobank pointed out, adding that it “may only be a warm-up for the market developments in 2013”.
Slaughter rates for beef cows and heifers in 2012 suggested producers had been positioned to the best extent possible to sustain and prepare for expansion. However, Rabobank pointed out that weather conditions would “thwart” any expansion efforts.
Two years of continuous price rises have resulted in a high of €4.09/kg for beef in July. However, EU beef prices recently levelled. Rabobank said: “It seems EU beef prices have found a new equilibrium at around €4/kg for prime beef. Supplies have been stable as declining slaughter numbers have been offset by declining exports and consumption.”
Rabobank also pointed out that the biggest challenge for the EU beef sector next year will be the ability to pass on higher prices to consumers. The report also showed that beef consumption in the EU for 2012 was down 3.3% and exports were also down by 18% in January to August.
According to Rabobank the global meat industry must exercise discipline, particularly in the poultry sector. The report said: “Poultry production cuts are likely to come about, driven by negative margins in the wake of severe feed cost increases.
“To the extent that this increases poultry prices, it may also benefit the beef industry as the gap between beef and chicken prices narrows and possibly shifts demand towards beef.”