What is behind the high world prices for beef?

Many countries around the world are currently experiencing high prices for cattle or beef due to a combination of local and international factors, namely limited supplies and strong export demand. Let's analyze the situation in more detail.

Supply restrictions in Brazil and Australia

Suppressed supply and strong export demand contributed to marked inflation in Brazilian cattle prices, with steers up more than 70% year-over-year in dollar terms in the first week of May.

Cattle slaughter in Brazil is now below last year's levels, with total slaughter in the first quarter of 2021 down 12% year on year, according to Meat and Livestock Australia. Irregular rainfall in 2020 hampered grass growth and pasture quality, subsequently delaying livestock grazing. Strong export demand from China helps support Brazilian prices; in the first quarter of 2021, shipments increased by 31% compared to the same period last year.

Demand for protein in China continues to influence global beef markets. Beef prices in China have risen steadily for some time, initially due to ASF, which reduced pork production and led consumers to switch to other proteins. Then COVID-19 caused disruptions in meat processing, but demand for beef remained strong, boosting demand for imports. In 2020, Chinese imports of fresh and frozen beef rose 28% year on year, increasing another 20% year on year in the first quarter of 2021.

Australia reportedly recorded the smallest herd of cattle in over 30 years due to drought and the subsequent decline in herds. After more favorable conditions in 2020, many producers are now replenishing their herds, causing increased competition for available animal stocks and rising livestock prices. Lower inventories also contributed to a 22% year-over-year decline in Australian beef exports in January-March 2021.

And this fact will be taken into account when preparing the monthly analytical report Meatinfo.ru

Europe

Although exports are not large globally, shipments from Europe are also lower than in previous years, due to the reduction in the number of dairy cows and heifers. This will generally support the rise in cattle prices in Europe; now the average price of R3 cattle in the EU has increased by 12% year on year.  

Demand drives prices in the US and Argentina

While high Brazilian and Australian prices were largely supply-driven, the rise in prices in the US was on the other side. Wholesale U.S. beef prices have risen markedly over the past few weeks due to increased demand from retailers, the reopening of catering establishments, and rising exports (mainly to China ). In April, average wholesale beef prices were 5% higher year-over-year and 19% higher than 2019 (pre-Covid).

However, despite some increases in U.S. cattle prices, processing capacity is reported to be limiting growth at the farm gate. Reports show that US cattle supplies are plentiful, but processors have been running at full capacity for some time, unable to increase slaughter rates to meet demand.

Argentina recently imposed a 30-day ban on beef exports to try to contain domestic price increases, driven in large part by strong demand in Asia (China). This could further limit global supply as more products could potentially flow into China from other places as compensation. Argentina is the second largest supplier of beef to China after Brazil.