Ag Industry, Forecasts

Rabobank tips USA market to import more beef

The USA could be an even greater importer of beef next year, Rabobank predicts in its Q4 Global Beef Quarterly report

The US – the world’s second-largest importer of beef after China – is likely to be looking for even more beef from global markets over the next three years, as its own domestic production declines, Rabobank says in its Q4 Global Beef Quarterly report.

However, production constraints in beef-producing nations around the world, including Australia, means that international markets will struggle to meet the gap left by the US beef market’s contraction.


US beef imports are expected to increase next year as domestic production decreases

This could potentially lead to an increase in global beef prices and the redistribution of trade volumes, although the impact of slowing economic conditions and waning consumer confidence around the world may also soften global demand, it notes.

Rabobank says that while the reduction in the size of the US cattle herd is nothing new – with numbers declining rather than building in recent years – it has, to date, not impacted the amount of domestically-produced beef reaching US consumers.

But that is expected to change soon, with the bank forecasting the tipping point to be reached in 2023, when US beef production should fall by three per cent, with annual declines of two to five per cent possible into 2026.

“On average, that is the potential loss of 400,000 to 500,000 metric tonnes of beef from the US production system per year during this period,” the report says.

Behind this decline – says the report lead author, Rabobank senior animal protein analyst Angus Gidley-Baird – is a natural cyclical reduction in cow numbers after the US herd peaked in 2019, compounded by the impacts of recent drought conditions and high feed costs.

Gidley-Baird says previous periods of decline in US beef production suggest the country’s retailers and restaurants will look to the global market to fill this void and US consumers will likely outbid the rest of the world to secure supplies.

The question is which beef-exporting nations will fill this gap, he says.

“While neighbours Mexico and Canada – the two largest suppliers of beef to the US – are likely to take up some slack, Canada is going through its own cattle herd liquidation phase and is likely limited in what it can supply,” he says.

“Australia and New Zealand, the third and fourth largest US suppliers, are the logical next options. But Australia’s recovery from its own beef cattle liquidation phase is being drawn out with some questions as to whether it will have the cattle available to produce the same volumes it has done in the past.”


Rabobank senior animal protein analyst Angus Gidley-Baird

Gidley-Baird says New Zealand beef production was also expected to be limited – forecast to decline four per cent between 2023 and 2025 – while Europe, not a big supplier of beef to the US anyway, was set to continue to record a structural decline in production over that period.

“This leaves South America, which has volume, but lacks the trade access needed to fill the sizeable gap in US production,” he says.

“Brazil’s production is forecast to grow over the coming years, but we expect production in Argentina to decline then plateau. In combination, these two major South American exporters will not increase production enough to offset the drop in the US, even if trade arrangements are changed to increase exportable volumes from South America.”

The report says the net result was that Rabobank expects the decline in US beef production will not be met by production growth in major exporting countries.

“And this is even without consideration of any other increases in global beef demand over the same period,” the bank adds.

For Australia, favourable seasonal conditions continue to support producer demand and, in turn, cattle prices, despite softening at the retail end of the supply chain.

Gidley-Baird says local beef prices are expected to hold toward the end of the year, with a likely dip in the new year as cattle volumes increase and summer pasture growth starts to dry off.

Labour constraints and tight margins are leading to a reduction in slaughter numbers in the Australian beef market.

“Volumes dropped below 2021 volumes through September and October as labour continues to be a problem, but, more recently, poor margins have led to some plants scaling back volumes,” the report says.

Gidley-Baird says that while the bank believes the Australian cattle herd is growing, it is possibly not doing so at the rates we have seen in the past.

“We think producers are taking advantage of good feed availability and high cattle prices to trade cattle rather than build breeding numbers,” he says.

“As a result, we haven’t seen cattle prices ease and slaughter numbers lift, despite more than two-and-a-half years of good seasonal conditions – particularly in the south east.”

However, Rabobank believes cattle numbers will increase through 2023.

“The challenge now is that cattle prices will need to drop further than previously to generate viable processor margins given the rising costs and softer consumer markets,” Gidley-Baird says.

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