Global Beef Outlook: Tough time Ahead for Packers

Speaking to Matt McKamey from Rabo AgriFinance in the US, Charlotte Johnston TheCattleSite editor looks at cattle market projections for 2012.
calendar icon 20 March 2012
clock icon 2 minute read

Mr McKamey appears to be cautiously optimistic about cattle production over the next couple of years. Speaking at the National Cattlemens Beef Association annual convention, it was hard not to be optimistic. With the industry seeing sky-high prices last year, he is fairly confident that 2012 will see double digit returns for beef producers.

Despite a declining beef herd - which will limit supply, all time high beef exports and new Free Trade Agreements (FTAs) with South Korea, Mr McKamey's caution comes on the back of the global economic crisis, which he says we are not clear of yet. He also said that consumers hold the power, at any time they could decide to purchase another protein product.

One concern is how consumers will respond to increasing beef prices. Mr McKamey said that this was currently unknown. "So far it seems that consumers have been able to absorb the additional expense, but at what point will this stop," he said.

It is likely to be a tough year for meat packers, he said. They could potentially be dealing with losses, as cattle costs increase, how much of this can they pass onto consumers, or how can they pass some of the cost back to producers?

Demand for beef is still strong, despite per capita consumption falling over the past 25 years. Instead consumer demand for high quality beef has increased.

As a general trend beef production has been declining, as producers have liquidated herds in order to maintain their operations. The drought in the South has had and will have an impact on beef supplies, Mr McKamey said.

Saying this, cattle are producing more pounds of beef per animal, which is going someway to offsetting the decline in production.

March 2012
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