The global beef market is changing. Are you ready?The global beef market is changing. Are you ready?
Changes are afoot in the global beef trade.
January 27, 2016
“I think our pathway to growth is to be a larger player in the export market. If we do not grow this thing with exports, we’re looking at a smaller pie.”
That’s how Don Close, protein analyst with Rabobank, summarizes the global world that U.S. beef producers find themselves in. It’s a changing world, he says, both here in the U.S. and in other beef-producing countries, and those changes will increasingly affect U.S. producers.
That’s because beef production patterns are changing around the world and new dynamics in trade and global consumer preferences are coming into play. Take, for instance, the long-standing trade relationships the U.S. has had with its traditional trading partner in beef, Australia.
According to Rabobank analyst Matt Costello, based in Australia, the drought-driven liquidation that Aussie producers have endured is coming to an end. This year, Australia will have 300,000 less tons of beef on the export market. “Next year, in 2017, it’s probably going to be half a million tons less that what we’ve been exporting in the peak slaughter years.”
That will change the dynamics in the world beef market, particularly as it affect U.S. producers. Australia has bilateral trade agreements with several countries. “If the liquidation in Australia stops, they have all these other commitments and a short supply,” Close says. “Will they have as much product to ship to the states as they’ve had historically?”
The answer, of course, is no. And that sets up a potential shortage of lean grinding beef that fast-food restaurants need to feed the hamburger fix of American consumers. While those imports concern cattle producers, because that has a direct impact on cull cow and bull prices, Close say the current situation with U.S. cattle numbers means we don’t have anywhere close to the volume of lean grinding beef to support the volume of hamburger that fast-food restaurants need.
So where will that product come from? “Every expectation is Brazil and Argentina will open to fresh and frozen product to the U.S.,” Close says.
However, that has more implications than just the hamburger market. Both Brazil and Argentina are ramping up feed-grain production and will, over time, need to find a market for that increased production. Just like the U.S. in the 60s and 70s, they may well decide one good use is to feed it to cattle. That won’t happen very fast, he says, but given that Brazil has around 200 million cattle and is a major player in the world beef market, a change in the type of beef product they produce will have ramifications for the U.S.
But that’s just one side of the import-export equation. The other side is the kind and amount of beef that the U.S. exports. And that’s where Close sees the greatest potential for U.S. producers. But if the U.S. is to increase its global beef presence, it may be that U.S. producers will have to look differently at how they produce beef.
In a report titled “Agfocus: Global Beef Production Becoming More Competitive and More Complex—How Should the U.S. Industry Respond,” Close and Costello pose three points for discussion. “We feel a focus on enhancing U.S. export opportunities, producing beef that meets emerging consumer preferences and implementing programs such as a voluntary, industry-driven cattle and beef traceability program are important steps to strengthen the U.S. position in the market,” Close says.
Consider consumer preferences. “Just like consumers here, consumers globally are continuing to ask the question, ‘Where does my food come from?’ I think we’re deep enough into that issue now that we can pretty quickly come to a consensus that request is not going to go away.”
Does that mean a change in how we produce beef for the export market? Perhaps. Close points out that Australia was able to negotiate a bilateral trade agreement with China because they have a viable traceability system and were willing to meet China’s demand for NHTC cattle. “If that’s a cost of entry, then let’s at least give it some discussion,” Close says.
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