High Beef Prices Continue to Threaten Consumer Appetite

The Rabobank’s Global Cattle Price Index continued to fall through May, down 6% relative to Q1 2013 on the back of a down-trend in cattle prices across the globe, notably in two of the most important export countries, Australia and Brazil.

The strengthening US dollar also contributed to pushing global cattle prices down. However, according to the report, the broader picture for demand indicates consumers are becoming increasingly reluctant to continue paying high prices for beef.

Rabobank analyst Albert Vernooij explained: “Industry performance has been mixed across the globe…The relative value proposition for beef has diminished as beef prices have risen relative to chicken and pork.”

He added: “We maintain the view that global beef supplies will remain near 2012 levels with a bias towards a minor increase driven by the Southern Hemisphere. This will be led mainly by Brazil, Australia, Argentina, Uruguay and New Zealand—coupled with continued liquidation in US beef supply.”

Other key findings include:

  • In the European Union, prices continued to increase as a result of a combination of the higher demand for beef and tight supply.
  • The outlook in the United States (US) remains gloomy. Feedlots are still being hit by the continuation of strong feed grain prices exacerbated by adverse weather and an insufficient decline in feeder cattle costs, but packers have been posting improved margins since May.
  • Although production has been flat in China, prices have surged. Rabobank expects the value of China’s beef market to grow in excess of 10% annually over the next three years.
  • Companies located in South America, particularly in Brazil, should continue benefiting from the herd recovery and brisk exports.
  • Cattle prices in Australia and New Zealand have continued to decline due to increased marketing driven by drought.

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