Australian beef production growing against global declines

Beef-producing nations in the Southern Hemisphere, including Australia, are continuing to increase production volumes despite a global trend of production decline, according to Rabobank’s Q4 Global Beef Quarterly report.

However, the increases in Australian and Brazilian beef production have not been enough to offset the product declines in Europe and the US.

According to Rabobank, global beef production across “monitored markets” is expected to decline 1% year-on-year in 2023, and will play out similarly in 2024.

The report says the beef sector is seeing ongoing strong demand in the US, although this may be weakening, accompanied by reduced cattle and beef supplies. In Asia, weak demand and high inventory levels are testing the market.

North American cattle prices are expected to continue to track at high levels, while Southern Hemisphere prices remain soft.

In Australia, cattle prices have dropped 28% since June, while New Zealand and Brazil also saw prices fall but by smaller amounts. In the US, cattle prices were steady while Canadian prices rose 3% between June and October.

Rabobank expects that in 2024, the ongoing slow global economic recovery will limit consumers’ expenditure and likely curb their spending on beef.

In 2023, it was clear consumers were being more cautious in their purchase decisions as many markets did not experience the growth in consumption expected as economies recovered from COVID-19. This is expected to continue in 2024.

Indications from China are that the type of products in demand are changing, with more attention on value-for-money products and less on premium ones.

“This consumer caution may be supported initially by reduced volumes of more expensive North American beef and increased volumes of Australian and South American beef,” the bank said. “However, when production in the US contracts to the point where it exerts upward price pressure on global beef prices, we may see some pushback from global beef consumers. It is possible that 2024 will see margins in beef supply chains being squeezed to manage higher prices and accommodate the consumer.”

Beef trade is not expected to be materially impacted by conflict in the Middle East. Import volumes in Israel and Palestine make up approximately 1% of global beef imports. Impact will also remain relatively small if the conflict extends across the broader Middle East and North Africa region.

Rabobank estimates that the wider Middle East area accounts for 8% of global beef imports, with Egypt being the largest importer, sourcing largely from Brazil.

“However, there may be indirect impacts if fuel and energy costs rise. Furthermore, the Middle East is an important import market for poultry and sheepmeat, and any disruption to this trade may cause a rebalancing of protein trade around the world,” the report said.

Angus Gidley-Baird, Rabobank’s senior animal proteins analyst, said it looks like the Australian beef sector has reached the bottom of the market.

Higher volumes of cattle, congested supply chains, limited processing capacity and forecasts of poor seasonal conditions are weighing on the Australian cattle market through the third quarter. In response, the Eastern Young Cattle Indicator dropped 37% though Q3. In October, with the same conditions, prices found a floor and levelled out.

“We believe that the producer uncertainty that was causing prices to drop has eased and, as we head toward summer, producers will be more certain about what stock numbers they will run, returning some stability to the market,” Gidley-Baird said.

In the coming months, processing numbers are expected to see some change.

“Abattoirs are believed to have been running strongly for the last seven months, to the extent possible given labour constraints,” Gidley-Baird said.

It is uncertain if plants will shut down at year end with some cattle still backed up in the system or if they will use the holiday period to get through some of this cattle.

Either way, Rabobank is expecting slaughter numbers to increase in the first quarter of 2024.

Image credit: iStock.com/Giyono Giyono