Global beef supplies are starting to grow because of dry weather in the United States, surplus protein stocks in Brazil and changes to the Australian live cattle trade, Rabobank animal protein specialist Blake Holgate said.
“Each of these factors has the potential to cause major disruption to global beef trade flows and to drive global beef pricing lower,” he said.
It is estimated 70% of US beef cows are now under manageable drought stress, which is disrupting the US cow market.
Slaughter numbers are already higher than previous years so there could be some forced liquidation, increasing domestic US beef supplies and stocks in international markets.
“The next few months will be crucial with continued dry weather likely to see a liquidation around August.”
Growing beef supplies in Brazil and falling exports of chicken and pork because of restrictions have flooded the domestic market with animal protein, deflating prices.
“If low domestic protein prices continue it could push the Brazilian beef industry to try to find other export destinations for their product.
“We have already seen Brazilian beef exports increase by 20% in the first quarter of 2018 and unless the pork and poultry industries reduce their supply we are likely to see Brazilian beef exports grow even further.”
Australia began live cattle shipments to China in January with forecasts 100,000 could be transported this year.
“While 100,000 head is a small volume in the context of total Chinese beef production the potential flow-on effects of redirecting Australian cattle from other southeast Asian markets may set in motion a shuffle of southeast Asian beef procurement,” Holgate said.
“Indonesia’s announcement it will import 100,000 tonnes of carabeef from India in 2018 would easily account for the loss of 100,000 Australian live cattle diverted away from Indonesia to China and potentially establish a more permanent supply chain between the two countries.”
Of the three looming threats, the dry weather in the US would potentially have the greatest impact on NZ.
“Since April we’ve already seen weaker US beef import prices contribute to domestic cattle prices falling by 2% in the North Island and 3% in the south,” he said.
“We do expect the depreciation of the NZ dollar against the US dollar to limit further softening of schedule prices over the coming months.
“However, should the US imported beef price drop further it is likely NZ beef prices would follow.”
News a further 126,000 cattle will be culled in the next two years to control Mycoplasma bovis will put pressure on prices but the long-term impact should not be significant, Holgate said.
Export volumes rose only 1% in the first quarter of the year but fell in key Asian markets Taiwan, South Korea and Japan because of competition from Australia and the US and a temporary tariff hike by Japan.
In contrast, exports to China rose 9% over the same period.
