Global beef markets: Lower demand in most regions and diverging prices to affect exports
Beef markets around the world – other than the US – are seeing softer consumer demand, with global cattle prices now split into two distinct groups: those in North America and Europe, and those in the rest of the world, according to the latest Rabobank Beef Quarterly report.
The Q3 report says declining supply and strong consumer demand in the US is driving cattle prices higher, while lower domestic beef supply has also held up beef prices in Canada and Europe. In most other regions, however, the opposite (increased supply and lower demand) is making prices softer.
Report lead author, Rabobank Senior Animal Protein Analyst Angus Gidley-Baird said US cattle prices have increased almost 30 per cent over the last 12 months, whereas Australian cattle prices have dropped by more than 30 per cent.
“This price split is the largest we have seen in the past 10 years,” he says.
“Such a separation in prices will have consequences for beef exporters’ competitiveness, and we expect to see some shift in trade volumes as a result.”
Rabobank Senior Animal Protein Analyst, Angus Gidley-Baird
A consistent theme across most markets – other than the US – is softer consumer demand and full supply chains. In a number of regions, particularly in Asian countries, beef purchases made through 2022 and into 2023 in anticipation of recovery from Covid have not been consumed. These are now part of growing stock levels that also include other proteins.
“This price split is the largest we have seen in the past 10 years,” he says.
“Such a separation in prices will have consequences for beef exporters’ competitiveness, and we expect to see some shift in trade volumes as a result.”
A consistent theme across most markets – other than the US – is softer consumer demand and full supply chains. In a number of regions, particularly in Asian countries, beef purchases made through 2022 and into 2023 in anticipation of recovery from Covid have not been consumed. These are now part of growing stock levels that also include other proteins.
“Softer consumer demand is making it harder to move these volumes through the system,” Mr Gidley-Baird said.
New Zealand update
The report says increasing volumes of Australian beef exports are creating competition for New Zealand beef in the global market and this has led to the AgriHQ North Island bull prices dropping four per cent in July.
“However, the slowing of the US cow kill is expected to lead to a reduction in US-produced lean trimmings, which in turn is expected to provide price support for the global lean trimmings market,” Mr Gidley-Baird said.
“But the needle hasn’t shifted yet. Weak Chinese demand and high volumes of Australian beef have seen Australian and New Zealand lean trimmings exports prices drop while US-produced lean trimmings remain strong, leading to the widest spread since 2020.”
The report says New Zealand’s largest milk processor, Fonterra, announced in August a downward revision of the farmgate milk price from a mid-point of NZD 8/kgMS to NZD 6.75/kgMS. This significant decrease in returns is expected to cause margin pressure for many businesses and is likely to result in an increase in dairy cow culling.
“The number of cows processed in Q2 2023 is up 4.8 per cent compared to last year and, in addition to this, Fonterra has mandated that all calves must enter a value stream from this season onwards,” Mr Gidley-Baird said.
“And this could result in several hundred thousand additional calves being sent to processors within a six-week window that is already stretched.”
Mr Gidley-Baird said although much of the heat has come off the global beef market and returns have eased considerably, New Zealand beef export volumes in Q2 increased 14 per cent year on year.
“This increase has been underpinned by a seven per cent lift in beef production, year-on-year. Equal volumes were exported to China and the US – each taking 40 per cent of New Zealand’s total exports,” he said.
“While volumes are higher, weaker economic settings in China have negatively impacted prices and export earnings were back 13 per cent year-on-year for the quarter. Export volumes to Japan have also been impacted by softer demand, with volumes back 49 per cent year-on-year for quarter two.”
Beef’s sustainability agenda is expanding, with nature and biodiversity in focus
The report says that for some time, the sustainability discussion around beef has focused mainly on greenhouse gas emissions. However, over the past year, nature and biodiversity have become more prominent issues in beef sustainability discussions, and these topics will be even more relevant over the coming year.
According to Mr Gidley-Baird, globally fewer companies in the beef supply chain have made voluntary commitments around nature and biodiversity than those that have made emissions reduction commitments.
“But the set of drivers for both issues is similar, which can create synergies in how beef supply chain participants respond to both issues and reinforce the action being taken,” he said.
“Forces driving the new focus on nature and biodiversity include intergovernmental agreements and regulation, financial services undertakings, and voluntary commitments from the supply chain.”
Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of about 10 million clients worldwide through a network of close to 1000 offices and branches. Rabobank New Zealand is one of the country's leading agricultural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 32 offices throughout New Zealand.
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