Strong beef demand and limited supply growth is expected to bode well for the global beef market for the rest of this year and into the next, according to a Rabobank report.
The main question for many customers will be where to source sufficient supplies of beef. The second question will be whether consumers will resist higher prices, Rabobank analysts stated in the bank’s quarterly beef report Oct. 3.
The global economy’s slow recovery and buoyant markets in Asia, especially China, are expected to keep global demand strong. In addition, Chinese imports of beef might surge in the coming months, due to the rapidly approaching holiday season of Chinese New Year.
That could have Australian exporters switching their traditional trade patterns to those rapidly growing nearby markets instead of U.S. markets, where supply will remain tight. That scenario would support strong prices, which might be difficult to pass along to consumers. But prices for competing proteins are also expected to remain elevated, limiting competition, the analysts said.
Declining feed costs is inducing herd retention in many beef exporting regions, further limiting already tight supplies, they reported
Here in the U.S., the big story has been the ongoing saga surrounding the use of beta-agonists, feed additives used to increase lean muscle in the final days of finishing cattle. Tyson announced it would not accept cattle that had been fed Zilmax effective Sept. 6, following reports of lameness in cattle, and manufacturer Merck later temporarily discontinued sales of the product to evaluate the issue.
Despite the fact that the use of another beta-agonist, Optaflex, has not been affected, the issue of the use of beta-agonists is expected to negatively impact the U.S. beef supply, the analysts stated.
Ever-tightening supplies of U.S. feeder, and thus fed cattle, have been further tightened by a sharp decline in feeder cattle imports from Mexico. Those imports are down in excess of 450,000 head year to date, as cattle stock there remain tight.
In addition, recovering pasture and range conditions in the U.S. have renewed hopes of herd rebuilding, which would slow the liquidation of cows and could encourage heifer retention in the second half of 2013, Rabobank reported.
U.S. fed cattle prices rallied to $123 per hundredweight in August and September. Rabobank expects those prices to rise toward $130 per hundredweight by the end of the year and even higher in the first quarter of 2014 as a result of reduced placements into feedlots in the spring and summer
Feeder cattle prices (with heavy feeders at a record-breaking $160 per hundredweight) are expected to ease some this fall as shipments of feeder cattle and calves increase seasonally. Any price easing, however, will likely be temporary due to demand from excess feeding capacity, lower cost of grain and improved feedlot margins, the analysts reported.