Friday, March 29, 2024

MEATY MATTERS: Upheavals prop up beef prices

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Rabobank’s second quarter Beef Quarterly paints a positive picture of global demand and prices for the rest of 2017 in spite or more probably because of a series of upheavals and changes affecting the world’s beef trade.
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The most influential events are China’s decision to allow United States beef imports after 13 years, a series of adverse political events related to Brazil’s beef industry, the recently announced ban on cattle and buffalo slaughter in India and below-average production in Australia and New Zealand combined with higher than usual US beef exports.

The world has largely adjusted to the absence of trade with Russia though the European beef situation will undoubtedly change as a result of Brexit, though quite when and how is not certain.

The growth of US beef imports into China is likely to be gradual rather than quick because it will take time to set up the border protocols and the market has developed a taste for grass-fed, not grain-fed, beef.

There is also the small matter of the broader Sino-US trade deal that requires cooked broiler chicken to be accepted by the US.

Other important issues are the ratification of US beef plants by the Chinese authorities, full animal traceability and absence of hormonal growth implants and above-normal hormone levels.

However, what will make the process easier is the fact China will accept third-party verification of the location of origin and feedlot instead of insisting on individual animal traceability and plants will need to be individually certified only in the event of a problem with product from a particular plant.

In contrast NZ and Australian plants must be separately certified.

China’s growing demand saw 15% of consumption, about two million tonnes, imported in 2016 but that percentage of a growing market is forecast to reach 20% by 2020.

Conversely, even without China, US exports exceeded the long-run average of 10% of annual production in the first four months of 2017 and are predicted to hit 11.4% for the year as a whole. That equates to an extra 17,000 tonnes exported – about 7.5% of NZ’s exports to the US.

Political scandals in Brazil, related to JBS executives bribing politicians and a fine of US$3 billion, the implication of President Temer in the scandal and meat inspection irregularities have all combined to lead to import bans by countries including the US and a severe loss of confidence in Brazil.

The situation has also disrupted beef supplies around the world.

The impact of the Indian government’s decision to ban the slaughter of beef for religious reasons has not yet become clear though it is possible individual states might decide to ignore the ruling, particularly those that are predominantly Christian and consume beef.

Global disruption will be largely confined to southeast Asia though Indian beef, mostly buffalo, finds its way from Vietnam into China via the grey market.

That would naturally exacerbate the Chinese gap between domestic consumption and production and would necessitate more imports from other exporters such as US, Australia and NZ.

Tight supplies out of Australasia combined with the other factors make it highly probable beef prices will remain high for some time, even well into 2018.

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