Rabobank: Global and Regional Drivers of Record Beef Prices

In the first couple of months of this year, prices moved against their usual seasonal downward trend, driven by declining stocks of cattle in the EU.

In many parts of the world, there are either high livestock prices or high beef prices. While there are some general factors such as strong demand from CHINA , local factors may be more important in creating these record prices for cattle and beef.

“We believe that many of these local factors will lead to price adjustments. However, with demand in China remaining robust, we also believe there has been a fundamental uptick in the market,” says Angus Gidley-Baird, Senior Animal Protein Analyst at Rabobank.

These record prices - whether for cattle or beef - also highlight the pressures of a very narrow market. “Given the growth in demand and global trade, the pressure created by the current system means that seasonal conditions are now causing major shifts in the markets,” explains Gidley-Bird.

Renewed competition between foodservice and retailers and strong exports have placed the US beef sector in a demand-driven market. In April, beef prices were 18.5% higher at wholesale and 11.5% at retail compared to 2019 levels.

Since April 2020, cattle shipments have averaged 120% of processing capacity, so despite record high demand for beef, cattle prices have been declining throughout the pandemic.

According to Rabobank, US retail beef prices could rise through most of May and even June, with wholesale prices set to start to decline in the near future. However, prices could remain 5-10% higher than pre-pandemic levels for most of 2021.

The main factor in the rise in prices for cattle in Brazil was the delay in the seasonal rains and drought. Producers have decided to delay the sale of cattle until they reach the desired weight, and since about 50% to 60% of Brazilian cattle are exclusively pastured, this has caused supply to fall below demand. High cattle prices also encouraged breeders to keep females, further limiting the supply of livestock.

Cattle prices began to decline at the end of April, but supply cuts will limit further price declines.

Successive years of drought and the destruction of large stock have left Australia's cattle population at its lowest level in over 30 years. Improved seasonal conditions in 2020 and 2021 have fueled intense competition between producers seeking to replenish livestock stocks and increase their value. In February 2020, prices for young cattle jumped by almost 30% y / y, and in February 2021 - by another 20%.

Rabobank believes current cattle prices will decline as livestock numbers increase and producer demand declines. However, as the supply chain overcomes disruptions and consumers adjust their price expectations, the market will adjust and a new, higher baseline will be established.

Beef cattle prices in China rose steadily in 2021 and rose by 9% in April compared to the same period last year. This represents an increase of over 30% compared to the same period in 2018 (pre-ASF era). The key driver of this price escalation is the slow growth of domestic production, which cannot keep up with the strong growth in consumption. This has led to an increase in China's beef imports in recent years.

While some beef consumers are expected to switch back to pork - once pork production recovers, Rabobank believes demand for beef will remain strong, continuing to drive imports from the global market.

EU beef carcass prices have been on the rise since the fourth quarter of 2020, with the average EU beef carcass price now up 7% compared to the same period last year. Prices for cows are even higher - by 15% compared to the same period last year, indicating a shortage of cows for slaughter.

In the first couple of months of this year, prices moved against their usual seasonal downward trend, driven by declining stocks of cattle in the EU. While supply is expected to pick up in the second half of 2021, prices are likely to be held back by increased demand as the catering sector reopens.