Global beef production in decline
Global beef production is expected to drop slightly (0.2%) from the figures reported in 2019 due to economic disruption caused by the COVID-19 pandemic. Therefore, analysts are foreseeing a total production of 61.53 million tonnes, partially encouraged by the demand in China, which is expected to increase beef imports by 15% this year. From a global perspective, however, beef imports are expected to decline by 1% to 8.72 million tonnes due to closure of the foodservice sector and unbalanced demand for different valuable meats.
"Suppliers around the globe are all struggling through the pressures of COVID-19 and it’s likely to be some time before a normal operating environment resumes. Inconsistent supply and shifting demand from international markets will mean that the global competitive landscape will show elements of unpredictability for some months to come," warns Meat and Livestock Australia (MLA) in its latest global market report.
In the Chinese market, South American beef seems to have an advantage thanks its lower price, according to Beef to China platform: "The average prices of South American beef, which was mostly grass-fed, were generally lower than that of North American and Oceanian beef. According to the statistics of this February, the average price of Brazilian beef, from which China imported the most, was 5,840 dollars per ton, followed by Argentine beef that ranked second to the imports of Brazilian beef, whose average price was about 5,400 dollars per ton; the average price of Chilean beef was about 4,740 dollars per ton, and that of Uruguayan beef was the lowest among the 10 suppliers, with the value of 4,400 dollars per ton. Contrary to that, the average prices of Canadian beef and the US beef were quite high, both reaching up to 8,500 dollars per ton, and the average prices of beef from Australia and New Zealand were both about 6,000 dollars per ton."
Nevertheless, disruptions in the supply chain in Brazil, Argentina and Uruguay is expected to slow down beef exports in the Chinese market. In Uruguay, containment measures are still expected to cause processing delays and challenge supply chains over the coming weeks. Cattle slaughter for the year-to-April is expected to be the lowest since 1999, at 570,000 head.
In Argentina, lockdown measures have slowed beef production as a number of processors have been forced to close, impacting availability of beef for exports. Packers have reported difficulty managing carcase balance because of the skewed retail demand, which could mean that high volumes of beef will be frozen for sale later in the year, according to a report from Steiner Consulting.
Brazil, the world's largest exporter of beef is facing a reduction in operations in processing plants, with some processors operating at only 30% of their operating capacity, while a number of meatpackers in Brazil have suspended operations due to health concerns. Also, social distancing measures, including the closure of bars and restaurants, which has reduced meatpacker interest in buying cattle with Brazilian cattle prices subsequently dropping. The number of plats approved to export to China may provide some support for the Brazilian beef industry but further logistics problems can reduce the volume of beef exported.
According to the latest report from Gira, volatility is the main word to describe the global beef market in 2020. "Brazil is expected to record the largest declines in production, as falling prices encourage ranchers to retain cattle, limiting the availability of cattle for slaughter. The market could see some recovery in Q3", says Felicity Rusk, AHDB analyst. At the same time, a reduction in demand for prime cuts in the EU market will weigh on prices, which could cause a backlog on cattle on farms, which could, in turn, hamper market recovery.
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