Despite continued tight global cattle and beef supplies in the fourth quarter of 2014, prices moderated from third quarter highs. A finely balanced global market, however, has analysts questioning whether new price norms have been reached or whether there is still room to go higher.
Factors to consider are a potential decrease in Australian exports and a run-down in Canadian and Mexican beef herds by the U.S., Rabobank analysts stated in their quarterly beef report released Dec. 23.
The U.S. remains the global driver, with import demand affecting prices and volumes for other export and import countries. Recent strengthening in the U.S. economy and the dollar will support continued imports to the U.S., the bank reported.
But a collapse in oil prices and ongoing sanctions pressuring Russia’s economy and dramatically devaluing the ruble could impact markets given Russia’s status as the world’s largest beef importer, the analysts noted.
Many regional factors are at play for cattle and beef markets in 2015, supporting prices in the U.S., Argentina, Brazil, and New Zealand but creating challenges in several other exporting countries, the analysts reported.
Continuation of exceptionally tight supplies and improving beef demand within the U.S. and globally will continue to drive record prices in the U.S. Fourth quarter cattle prices have been at record or near record highs, with fed cattle trading between $160 and $174 per hundredweight and feeder cattle trading at $240, the bank reported.
U.S. federally inspected slaughter for the year to November was down 7 percent, with beef production down 5.5 percent due to heavier carcasses, the bank reported.
While cattle on feed in large feedlots at the start of December was up 1.4 percent year over year, November placements into feedlots were 4 percent lower and marketings of fed cattle during November were down 11 percent, according to USDA.
U.S. cattle supplies will again be tight in the spring with renewed price strength expected. Feeder cattle supplies will be exceptionally tight, supporting prices, but prices will be sensitive to any recovery in feed grain prices moving forward, the analysts reported.
Shipments of virtually all classes of Canadian cattle to the U.S. continue at an extraordinary level, driven by exceptional prices and a stronger U.S. dollar. In addition, November year-to-date Canadian cattle slaughter is up 4 percent year over year.
The coming year could be a critical one for Canada’s cattle industry as the country will have to determine whether it starts rebuilding or further downsizing the industry, the bank reported.
In Mexico, the beef industry remains severely constrained due to low cattle availability. Slaughter numbers are expected to be down 5 percent year over year at the end of 2014 with beef production down 1.7 percent, aided by lower feed prices and better pastures.
Rabobank forecasts another decline, about 1.4 percent, in Mexican slaughter numbers in 2015 and flat beef production through the year.
Exports of Mexican cattle continue to grow, however, about 10 percent in 2014. Cattle prices for the year to November were up 40 percent, while domestic beef consumption has decreased and prices have only increased 24 percent.
Elsewhere in the world, Rabobank reports:
Limited supply and strong exports continue to boost prices in Brazil, and strong international demand for Brazilian beef is likely to be sustained in 2015 due to tight global supplies, demand from Russia and the reopening of Chinese markets to Brazil.
Australia continues to see record slaughter and with a dry summer forecast, slaughter numbers are expected to remain high — keeping prices low. Beef exports for 2014 are set for a record, driven by strong demand from the U.S., and cattle exports are expected strong as well.
Very strong U.S. demand continues to underpin the New Zealand beef industry with record farm gate prices in November. The outlook remains positive for the first quarter of 2015.
The EU beef market is increasingly separating into premium beef and ground beef markets. Prime beef prices are expected to remain elevated in 2015 while ground beef prices will remain under pressure due to lackluster demand and a growing supply from dairy cattle.
Retail beef prices in China are expected to remain stable in the first quarter as consumption isn’t strong enough to push prices beyond current historically high levels.