Rabobank’s animal protein senior analyst Angus Gidley-Baird revealed that these underlying factors had the potential to cause “major disruption” despite strong beef production and prices globally.
The drought downfall
Drought has also been flagged up as a possible disruption across the US beef industry by the analyst, who said precipitation was limited over the winter, and early placements of calves into the grow or feed yards could hit the fed cattle marketing rate in August, which could reduce fed cattle supplies through the fourth quarter.
The analyst added that a total of 20 US states were currently experiencing drought and 70% of beef cows had some degree of drought stress. Eight states, containing 34% of the US cow herd, were rated as having ‘extreme’ or ‘exceptional’ drought.
Despite Brazilian beef exports increasing by 20% during the first quarter of 2018, restrictions in the international market for the country’s poultry and pork could put margin pressures on beef supplies by searching for more global consumers in the market.
Other challenges included live cattle supply chains, where the analyst explained that variable supplies seemed to be overcome by utilising e-commerce as a selling platform.
“With global beef production increasing and major exporters, such as Brazil, the US and Australia, looking to increase volumes and exports, supply pressure will become increasingly evident. The challenge will be to avoid some of the potential icebergs along the way,” said Gidley-Baird.
Other global highlights addressed by Rabobank were the US-China trade war and the Australian sheep scandal.
On 23 March, US President Donald Trump announced his intention to impose tariffs amounting to US$60bn on imports from China. As a result of this, China initially retaliated with a list of 128 US products, soon followed by a further list of 106 items that would be subject to a 25% tariff, which included beef.
However, the analyst said that the imposition of a 25% tariff was only expected to have minimal impact on the US beef industry and even less on broader global beef trade.
Australian television broadcast footage, showing distressed, unwell and dead sheep on board a vessel sailing from Australia to the Middle East, had caused animal welfare concerns for cattle, added Rabobank. However, a Government review had now been implemented that included recommendations for traders to reduce stocking densities and measures to improve conditions for livestock.
Rabobank released its Q2 results for the pork sector in April, also highlighting challenges for the industry.