US - No near term rebound is expected for the American beef industry as it settles further into a contraction stage, lifting beef prices and forcing shoppers to opt for other proteins, say Rabobank analysts.
In their report entitled, “North American Beef: The Liquidation Continues,” Rabobank researchers state that before any kind of recovery is staged, a turnaround in feeding sector equity is needed.
The report states that factors such as the Mandatory Country of Origin Labelling legislation (MCOOL), feeder supplies and diminishing output are placing stress on both producers and processors, which report author Don Close has said is quickly diminishing the optimism of the New Year.
“At the beginning of 2013, the market was optimistic that the industry could turn the corner and begin to grow again,” said Mr Close, Group Analyst for Rabobank Food and Agribusiness Research. “However, the second half of the year is bringing a less optimistic view as the industry contracts and, as a result, beef is at risk of becoming a higher-priced luxury protein.”
The gap between beef and other options such as pork and chicken are beginning to widen. This is making consumers look at cheaper cuts and, more seriously, opt for other proteins altogether.
“A number of complex challenges, including growing price spreads between beef and alternative proteins, excess capacity along the supply chain and dwindling profitability along the chain, are contributing to the shrinkage,” added Mr Close. “Rabobank expects domestic beef supplies to continue to contract and the supply chain to continue restructuring, making a rebound in the beef industry unlikely in the near term.”
Copies of the report are available upon subscription with Rabobank.