Rabobank sees bright prospects for beef
Strong global price levels ahead
By Carol Ryan Dumas
Supply and demand in the global beef market is relatively balanced, but limited supply on the horizon, strong import demand and high prices for competing proteins are set to bring strong price levels in the third quarter of this year, according to Rabobank’s quarterly beef report released Wednesday.
Stronger prices are likely once the current boost in supply — driven by drought in Australia and a temporary increase in U.S. production — has worked through the system, Rabobank reported.
In addition, availability of feeder cattle and rising production costs will limit global expansion into 2015, supporting an ongoing positive outlook for producers but continuing tight circumstances for processors.
One of the main wild cards is rainfall in Australia and to a lesser extent the U.S. and Brazil, where a continuation of drought would push more cattle through the system, the bank reported
The level of Indonesia imports during the July Ramadan festivities and Chinese imports towards the high season at the end of the year are also on the radar. In addition, relatively high beef prices might lead to consumers trading down to pork or poultry, although those competing proteins — especially pork due to PEDv — are expected to tighten, the bank reported.
Around the globe, Australia’s drought-induced supply boost will continue until rainfall has improved pastures, and prices will remain under pressure. Prices in Brazil will remain high due to strong export growth, despite the discovery of an atypical BSE case, and the World Cup being held there.
Beef imports in China are still strong despite some weakening, and retail beef prices are 12 percent higher than year-ago levels. Indonesia’s sufficient live cattle imports and higher boxed beef imports have stabilized prices there, the bank reported.
In the U.S., cattle and beef prices exploded in the first quarter of the year and eased to still high levels in the second quarter. Higher-than-average feedlot placements between September 2013 and February of this year have started to enter the market and will continue until August.
Rabobank earlier projected summer lows of $138 to $142 per hundredweight for fed cattle but reported there is growing concern that prices could see additional downward pressure for a short period.
Year-to-date fed slaughter is down 3 percent, however. Once the supply of summer-fed cattle is worked through the system, supplies are expected to tighten and prices will strengthen through the fourth quarter and into 2015, the bank reported.
Fed steer slaughter is down only 1 percent, but heifer slaughter is down 7 percent, showing the beginning of heifer retention for herd rebuilding. Beef cow slaughter is also down, 12 percent year to date, showing cow/calf producers have stopped liquidating females, and dairy cow slaughter is down 11 percent, the bank reported.
Feeder cattle and calf prices continue to push to record highs in the upper $200 to mid $210 per hundredweight range — up $65 per hundredweight year over year — with no easing in sight, Rabobank reported.