Scottish experts assessed the volatility of the global beef market

As we move into the second half of the year, Scottish mainstream cattle prices continue to be around 10% higher than last year and 18% above the five year average. However, adjusted for inflation, they are only about 1% higher than last year and still 11% below their July 2013 peak, according to the latest market commentary from Quality MEAT Scotland (QMS).

Commenting on farm input cost trends, Ian McDonald, Senior Economic Analyst at QMS, said: “While feed prices are now down from their highs since April, prices remain higher than last year, suggesting that the cost of feed will continue to reduce the margins of pastoralists in the coming weeks and months.”

“It certainly was a volatile period for the global beef market, with the introduction and eventual lifting of public HEALTH restrictions resulting in a major rebalancing of demand in and out of retail,” says Mr McDonald. “Meanwhile, beef processors have had to deal with downsizing due to disease and a general labor shortage in many parts of the world.”

In the EU, cattle prices were lowered during initial lockdowns but rose significantly between early 2021 and spring 2022, but have declined in recent weeks, possibly as rising costs of living begin to dampen consumer demand.

The picture has been mixed across the EU, with prices in Germany plummeting to 416p/kg for young R3 bulls after a surge, while Polish prices have now fallen to 390p/kg. On the contrary, at the beginning of July in the Netherlands prices for young stock remained elevated at almost 450 pence/kg.

In addition, the effects of climate change have affected some of the major beef producing countries.

“In Australia, for example, beef production was affected by a severe drought that initially led to the elimination of the herd, followed by unprecedented rains that led to the need to replenish the stock, followed by a serious reduction in the supply of livestock on the market over the past couple of years,” explains Mr. Mr McDonald.

In 2021, Australian beef production has fallen by almost a quarter from 2019, and while a recovery is expected this year , the USDA still expects it to fall by about 15% from its 2019 high. 

“This reduction in supply has led to a significant increase in the price of Australian livestock. Although they were below the highs seen earlier this year, livestock in the eastern states still cost an average of 516p/kg in the week ending July 18, 13% higher than the cost of Scottish steers."

Meanwhile, in the US and CANADA, a severe drought last year led to the elimination of the herd. Steiner Consulting Group reported the highest cow herd eradication rate in the past three decades in the US during the first quarter of 2022, with cow slaughter well above historical averages in the second quarter.

However, demand for beef remains robust in the US, where more recession-resistant minced meats and hamburgers account for most consumption, and farm steers were priced at 427p/kg in early July.

In South America, high inflation rates for a long period forced the Argentine government to introduce EXPORT controls in mid-2021. Over the past year, this has supported domestic food security while limiting the capacity of beef processors in the country. 

Brazil's beef production also faced significant challenges last fall as it was closed to some major markets following the discovery of two atypical TGE infections in cows. However, Brazilian beef exports to CHINA have been rebounded this year, and increased shipments to the US have helped offset the shortfall in Australian beef going to the US.

Cattle prices in Brazil and Argentina signal that their beef has maintained its competitiveness in the global market, with steer prices in the week to July 17 at 322p/kg and 339p/kg, respectively.

“Many different pressures have led to significant market fluctuations around the world. Here in Scotland, one of the factors that has likely put some downward pressure on livestock prices over the last couple of years has been the ongoing labor restrictions faced by processors,” explains Mr McDonald.

Moving from short-term volatility to fundamentals, the OECD and FAO recently published this year's World Agriculture Outlook 2022-2031. These projections continue to point to an increase in global meat demand in the coming years. Total beef consumption is projected to grow by almost 6% between 2022 and 2031 due to population growth. To meet this increase in demand, global beef trade would need to grow by about 9%, reflecting a mismatch between population growth and output.

“As a net exporter of beef, Scotland is well positioned to make a sustainable contribution to global food security,” concludes Mr. McDonald.