The lifting of Covid restrictions is expected to lead to a rebound in household consumption, including a potential increase in beef consumption. Chinese demand for beef will pick up in the second half of the year, boosting global beef prices.
The contraction of US production is another a focal point. “The beef cow inventory has dropped to the lowest point since 1962, and feedyard inventories are showing a decline,” said Angus Gidley-Baird, senior analyst, animal protein, Rabobank. “This is expected to cause a redistribution of global beef supplies and an overall tightening of the market.”
The Brazilian beef supply is expected to be even higher this year, with China remaining Brazil’s the main export destination, though average import prices in 2023 will likely drop due to the increase in volumes. China was a top-three US beef export destination in 2022, but growth in export volumes slowed throughout the year. As US supplies decline and prices increase, the US will face continued headwinds into China over the medium-term, noted the analysts.
Total beef production is forecast to be steady in the first quarter of 2023, with a 5% lift in Australian and 2% increase in Brazilian production, almost enough to offset declines in the US, EU, and New Zealand. Cattle prices across most regions have continued their downward trend, with the notable exception being the US, where more limited supplies are providing price support, as per the report.
“The decline in US volumes should support increased trade from Australia,” explained Gidley-Baird. “Australia’s volumes will likely lift as prices ease, further supported by the potential increase in demand for chilled products with the growth in China’s retail beef sales. Meanwhile, an increase in retail sales via e-commerce and growth in the prepared dish market will provide opportunities for New Zealand exporters to capture more value.”
Tight beef supplies in 2022
Retail and farmgate beef prices cracked records in many regions in 2022, driven by elevated consumer demand and tight beef supplies. Brazil also achieved record export volumes and returns in 2022, due to growing Chinese demand, found the Rabobank team.
The softening in consumer sentiment and subsequent weaker beef pricing in late 2022 has flowed through into early 2023.
While beef supply settings are favorable for beef prices, consumer confidence will continue to be tested and have a bearing on beef returns.