Beef prices continue to soar: Rabobank

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The price of beef continues to rise around the world, already hitting record levels owing to a combination of global and local factors, Rabobank says.

Cattle prices across the globe continue to soar while in Australia, low heard numbers and drought has led to a disruption in the country's cattle market

In its Q2 beef quarterly report, the agribusiness bank specialists says the current global beef climate is ‘very tight’, with both strong demand and lower heard numbers contributing to the growing price.

Other localised factors, including droughts and varying consumer demands across the globe, have contributed to the disruption and is now causing major market shifts in the sector.

Down under, the tight global market has been felt, where successive years of drought and a large liquidation of the livestock population resulted in Australia’s lowest beef cattle heard in three decades.

The disruption meant the Australian price of young cattle jumped nearly 30 per cent in February 2020 and since, has risen another 20 per cent to February 2021.

Intense buying competition by producers was also noted as a factor in the rising price of Australian cattle, with producers looking to restock properties and generate value out of the increased pasture production.

Rabobank’s Angus Gidley-Baird, who co-authored the report, says the price increases had been impacted further by the improved seasonal conditions in 2020 which have carried into the current year.

"While lower volumes and higher prices make competing in the global market more difficult, the tight market situation is working in Australia’s favour and creating less resistance to our high prices," Gidley-Baird says.

"We believe that current cattle prices in Australia will ease as cattle numbers increase and producer demand dissipates.

"However, as the supply chain overcomes the disruption here and consumers adjust their price expectations, we believe the market will adjust and a new baseline will be established."

The report also outlined how the country’s beef sector may be returning to some level of normality, with producer demand for cattle easing slightly and feeders taking a more active share in the market.

Last year, producers were the largest buyers in the Eastern Young Cattle Index (EYCI) weaner category for a several months. Across the first three months of 2021, producers have occupied just 39 per cent of the market compared to feeders who account for 50 per cent.

Australian cattle slaughter remains very low, still. Numbers in the report suggests the east coast cattle slaughter in for April 2021 was down 30 per cent from one year ago and 31 per cent on the five-year average.

As a result, export figures were also low with 22 per cent less beef – just 72,502 tonnes – shipped across April than last April. That figure is also 11 per cent down on the five-year average.

The key markets of China (down seven per cent) and the United States (down five per cent) lessened their imports of Australian beef while smaller beef markets of Japan and South Korea lifted slightly across the opening four months of the 2021 calendar year.

"However, with the tight global supply situation – underpinned by Chinese demand which is expected to remain firm – we believe the global market has seen a fundamental step up," Gidley-Baird says.

 

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