American Drought Causes Beef Production Imbalance

GLOBAL - Rabobank’s Global Cattle Price Index dropped seven per cent from Q1 levels, driven mainly by generally weaker demand together with a stronger US dollar.
calendar icon 14 August 2012
clock icon 1 minute read

On the supply side, the world continued to be relatively short of beef as Brazil was the only major producer to deliver significant production growth. In a year-over-year comparison the Index is beginning Q3 down nine per cent from where it began in Q3 2011.

The downward pressure on prices will ultimately be balanced against reduced supply as cuts in North American grain-fed meat production take hold. The Southern Hemisphere should relieve some upward pressure on prices as beef production systems based on pasture will be better positioned to supply the world at lower prices. Supply is therefore likely to remain above last year’s levels in Brazil, Australia and Argentina.

Longer term, global meat protein supplies, and especially beef, will continue to lag income and population growth in important emerging markets, raising volume risks to processors and price risks to everyone from feeder cattle buyers to consumers.

The industry is flourishing in China where beef cattle production has expanded following considerable investment in the industry. However, Mexico continues to suffer from the impacts of the 2011 drought and looks set to suffer its fourth consecutive year of decline in domestic consumption. Looking to Q3 2012, Rabobank predicts a growth in global supply compared to 2011 based on herd liquidation in the US and EU or by natural herd recovery in the southern hemisphere.

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