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Beef Supplies Remain Tight Amid Robust Consumer Demand

29 December 2014
Rabobank

ANALYSIS - Tight global cattle and beef supplies continued in the fourth quarter of 2014, although prices tempered from their third quarter highs.

Dutch agricultural analysts Rabobank in its quarterly beef report says that the US remains the major global driver, with import demand affecting prices and volumes for other countries.

However, the analysts add that a big question heading into 2015 with such a finely balanced market is - if Australian export rates decrease and herds in Mexico and Canada continue to be run down by the US - whether a new norm has been reached for prices or whether they still have room to rise.

“The US continues to be the driver in the global beef market with constrained supply and strong demand keeping prices high.

“A recent strengthening in the US economy and dollar will support continued imports to the US however we are watching a drop in the oil price and depreciation of the Russian Ruble given Russia’s status as the world’s largest beef importer,” said Rabobank analyst Angus Gidley-Baird.

In the regional outlook, US cattle prices during the fourth quarter of the year have continued at record levels, driven by exceptionally tight supplies and strong demand.

Cattle supplies in the first quarter of 2015 will again be tight with renewed price strength expected.

In Brazil, strong international demand for Brazilian beef is likely to be sustained in 2015 because of the tight global supplies together with demand from Russia and the reopening of the Chinese market to Brazil.

Slaughter levels in Australia have continued at record highs.

Total exports for 2014 are also set for a record.

With a dry summer forecast, slaughter numbers are expected to remain high, keeping prices low.

The EU beef market is increasingly separating into a premium and ground beef market with divergent price developments.

Prime beef will remain elevated in 2015, while ground beef prices will remain under pressure due to lacklustre demand and growing supply from dairy-based beef.
In China, retail beef prices are expected to remain stable throughout the rest of 2014 and into the first quarter of 2015 as consumption is not strong enough to push prices beyond current historically high levels despite tight domestic supplies and continued growth in imports.

Very strong demand from the US continues to underpin the New Zealand beef industry with record farmgate prices registered in November.

Rabobank says that the outlook remains very positive for the remainder of 2014 and into the first quarter of 2015.

The coming year could be a critical year for Canada, as the country needs to determine whether it starts rebuilding or further downsizing its industry.

Argentinian exports are likely to continue be depressed, as an overvalued exchange rate currently makes Argentine beef more expensive relative to other countries in the region.

For Mexico, low cattle availability continues to cause constraints, although this is partially offset by increased cattle weights due to lower feed costs and better pastures.

Consumption in Indonesia remains strong despite high prices.

Following a record year of beef and cattle imports, concerns remain that trade developments between China and Australia and reduced cattle in Australia could tighten supply.

 

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