Global beef supply to outstrip demand in 2017

Global beef supply to outstrip demand in 2017


Stock and Land Beef
In contrast to what is happening on a global scale, Australian beef production will ease slightly in 2017, to its lowest level in over a decade, which should safeguard farmgate prices.

In contrast to what is happening on a global scale, Australian beef production will ease slightly in 2017, to its lowest level in over a decade, which should safeguard farmgate prices.

Aa

Australian farmgate prices shielded from decreasing beef prices.

Aa

GLOBAL beef supply is starting to outstrip demand but Australian farmgate prices are expected to be shielded by domestic fundamentals running counter to the international trend.

For Australian beef exporters, the opportunity - against a backdrop of rising world supply exerting downward pressure on beef prices - will lay in enhancing value proposition, particularly in relation to supply chain assurances, say the experts.

A new report from big agribusiness financer Rabobank on the global outlook for animal protein says the supply-driven global meat market in 2017 will be a boon to consumers but a challenge for producers and processors.

Rabobank global animal protein strategist Justin Sherrard, based in Utrecht, Netherlands, said in some parts, the supply/demand balance had already tipped.

“For example, in the United States, per capita consumption (of animal protein)  jumped by 5 per cent in 2015, a further 1pc this year and is forecast to grow by another 2pc in 2017 and we can see prices softening to encourage this increase in consumption,” he said.

Rabobank global animal protein strategist Justin Sherrard.

Rabobank global animal protein strategist Justin Sherrard.

Strong supply growth out of the US, Brazil and Argentina will lead the rise in global beef supplies, according to Rabobank.

Mr Sherrard said while price always mattered in trade markets, it was not the only consideration for importers.

“Brazil has already overtaken Australia to become the leading beef exporter to China in volume terms, and as Brazil is producing more beef, it is well-placed to keep growing exports to Asia and North America,” he said.

Brazil’s protein exports are forecast to jump by around 5pc in 2017, driven by the available supply and a weak Brazilian real.

Mr Sherrard believes Brazilian exports to the US will pick up in 2017 but will not overtake Australian trade with the US.

“Despite this new competition, the opportunity for Australian beef exporters is to retain and enhance the value proposition of Australian beef – that is, delivering the right product, at the right price and with the right supply chain assurances, into the markets that want and will reward this product,” he said.

Poultry is leading the trend to affordable protein, which has been the case for some time.

“However, beef remains an important part of protein consumption and certain cuts compete with poultry for affordable protein – typically in traditional, slow cooked dishes in developing countries,” Mr Sherrard said.

“Different beef cuts lead on quality and although these are less affordable, poultry and pork cannot compete in this part of the market.

“We do not foresee major shifts in any of these patterns.”

Local beef prices in Australia are expected to remain relatively firm as domestic supplies stay restrained. Lamb prices are also expected to hold up with ongoing strong domestic demand.

Rabobank’s senior animal proteins analyst in Australia Angus Gidley-Baird said in contrast to what was happening on a global scale, Australian beef production was set to ease slightly in 2017, to its lowest level in over a decade, as the domestic herd continued to rebuild after years of drought.

“It is this constrained local supply, together with restocker demand, that is expected to create a floor in the domestic beef market,” he said.

Mr Sherrard said a major theme in 2017 would be the increasing onus on producers to mitigate consumer concerns around animal health and welfare by adapting production models and supply chains.

“Maintaining high standards of animal welfare is not new to the animal protein industry,” he said.

“What is new is who defines the details of animal welfare standards.

“In our view, food retailers, foodservice companies and some branded meat companies are now taking a more active role in setting these standards, and in providing consumers with assurance that their standards are being met.”

This complexity is creating new growth opportunities for producers and processors who read the market well and respond swiftly, according to Rabobank.

Aa

From the front page

Sponsored by