According to the latest Rabobank report, Beef Quarterly Q2 2014, the global beef market will regain its positive momentum in Q3, once the current, temporarily high supply has worked through the system.
This will likely support further strengthening of prices, as supply of competing animal proteins tighten. The main wildcards for the start of these positive developments are rainfall in Australia, and to a lesser extent the continued drought in US and Brazil pushing more cattle through the system. Indonesian import development during the July Ramadan festivities and Chinese imports towards the high season at the end of 2014 will also have unknown impacts. In addition, the relatively high prices might result in consumers trading down to pork and poultry.
“The continuing positive market fundamentals will be encouraging for producers’ margins”, explains Rabobank Analyst, Albert Vernooij.
“However, longer term, the likely lower availability of feeder cattle and high production costs might limit the possible upside. For processors, the current stabilisation gives them room to regain margins, but prospects are less positive due to the approaching tight supply in most producing regions”.
The report gives regional outlooks for the EU, US, Australia, Brazil, Canada, Argentina, Mexico, Indonesia and China, as well as New Zealand.
For New Zealand beef, Rabobank notes there has been strong international demand in the first four months of this year.
“Despite slaughter levels during the same period falling and an exchange rate that has continued to rise to uncomfortably high levels during 2014, overall exports and average export returns have increased. Shipments reached 163,599 tonnes shipped weight, slightly higher than the same period last year. Overall average export returns have remained relatively steady throughout 2014.”
Rabobank comments that China’s beef imports reached 101,000 tonnes in the first four months of 2014, an increase of 34 percent year-on-year, but lower compared to the astonishing growth of 380 percent in 2013. Even with this volume, beef imports to China are historically very high.