25 June 2012

4 minute read

Speaking at a meeting of the International Meat Secretariat Beef Committee before the recent World Meat Congress in Paris, Richard Brown from market analysts Gira warned that grain fed beef producers could find times ahead difficult because of rising costs in particular feed costs.

He said that rising producer prices and rising costs should put pressure on demand, but all the signals in the market painted a promising picture.

The main trend for the global market will be an intensification of production and cattlemen will start to look to get better conception rates from the cows to improve production.

Mr Brown said that he expected the finishers to spend a little more in finishing their cattle to achieve a better eating quality. The move to feed cattle better quality feed in the latter stages of production will see animals finished more quickly and with better quality and conformation.

However, he added that because of the price of feed, feedlots in the US and South America have been experiencing hard times recently.

He said there is expected to be a selective modest increase in the breeding herd in the long term, with more heifers going into calf because of the higher cattle prices.

"For a change, I think we will have quite a good long run for farming cattle," Mr Brown said.

The growth in the herds in South America has not yet been seen but it is expected. The growth of the herd in the US, however, has been thwarted by the conditions of the pasture.

On the international markets, Mr Brown pointed to Turkey as a potential growth area, particularly for European exports and Turkey is a beacon for the development of the potential of the markets in the Middle East and North Africa for beef.

Mr Brown also warned that the beef chain is fragmented and has little communication between the various parts.

"Producers don't communicate with the processors and the processors don't tell the producers what they want," he said.

He said that one of the consequences of BSE was that the parts of the beef chain did start to talk to each other, but he said they still "have a long way to go".

Mr Brown said that between 2010 and 2020bef consumption growth will be broadly in line with the way the world is growing and the picture is very positive.

"With higher supply and better economic conditions there is going to be a good recovery in the US and EU, despite the fact that these two blocs are seeing an economic downturn at the moment. Broadly the world economy is growing with growth particularly in South America.

China is also seeing an expansion of its middle classes, which will make it a good market for beef.

Mr Brown told the delegates at the meeting that producer prices are expected to increase for all meats in China and while sheep meat prices are declining at present, in future they too are expected to climb.

Pig meat prices in China spiked in 2007 and 2011 because of PRRS and cattle prices are also going up with beef relatively expensive compared to other meats.

However, Mr Brown warned delegates at the meeting of the threat from poultry meat, which he said has a fundamental cost advantage over beef and he said that advantage is going to improve.

A restored economic confidence around the world should help to see restored confidence in the beef sector among breeders lifting cattle numbers in the US and Brazil, where the sector is likely to see greater intensification. China is also going to offer a good opportunity for the cattle sector.

The main message for the sector globally is that prices between the northern hemisphere and Brazil are converging because of economic conditions and a growing middle class in the developing countries.

However, as beef prices and cost of production increase the retailers will have to recognise these factors and realise that beef prices will need to rise.

In particular, Mr Brown said, the cost of ground beef must rise.

"It is not bearing its share of the price of cattle," he said.

"But it is a dynamic and positive climate for beef."