Where’s the beef — and where’s it going?

The world of beef is undergoing big disruptions with renewed trade between United States and China, a cattle slaughter ban in India and political upheaval and corruption scandals in Brazil’s processing sector.

Nevertheless, beef is holding its own among global consumers, said analyst Don Close of Rabobank.

“Beef has had a phenomenal year and a half. The demand for beef is holding very well,” he said.

There is a market for everybody because each of the top producers offer a different type of beef.

The Rabobank Food and Agribusiness quarterly report looked at the position of the world’s top beef producing nations, where export markets are strong and new players are emerging.

Strong market conditions prevail, but the herd size remains flat.

Beef production is steadily increasing, and about 1.2 million tonnes were available last year.

Canada exported 359,590 tonnes of beef in 2016 with 269,818 tonnes headed to the U.S.

Beef exports to the U.S. were down five percent while American exports to Canada were up 15 percent. Canada imported 185,719 tonnes of beef in 2016, although that amount has been declining for several years.

Exports of live cattle were down. Feeder exports were down by more than 40 percent and fewer fat cattle left the country.

Cattle-on-feed numbers are higher than usual because feeders are staying home, and more beef is being produced domestically.

Statistics Canada reported that 546,353 fed cattle and 211,528 feeders left for the U.S. in 2016, down from the big years of 2013 and 2014, when more than one million departed.

Record exports approaching more than 11 percent of the country’s production are expected this year.

The U.S. exported 1.1 million tonnes of beef last year compared to one million tonnes in 2015.

The U.S. herd is expanding at a brisk pace and analysts wonder if the growth in exports is developing fast enough to offset increased production.

“We have a level of concern just how much additional consumption of total meats we could absorb domestically,” Close said.

One way to maintain a balance is to produce smaller cattle. North American carcass weights were record large last year but are smaller this year.

“We see a flattening off in carcass weights, and that is one way we can address this whole issue,” he said.

While U.S. beef groups celebrated a return to China after a 13-year ban, the actual tonnage is small, said Close.

The Chinese required full animal traceability and do not allow growth promoting hormones or the use of ractopamine. Most of the beef is destined for the hospitality trade. Building up business will take time.

“A big share of what the U.S. has that is qualified to go to China today is actually product that was qualified to go to Europe,” he said.

He figures the eligible number of cattle could be about five percent of the total herd.

“The potential for China is mind numbing, but it is mind numbing only in the event that we can be talking a lot of years to see this thing fully develop,” he said.

China is expected to import two million tonnes of beef by 2020, representing 15 percent of its total supply.

Brazilian exports dropped 10 percent in the first five months of 2017 because of allegations of corruption and bribery of meat inspection officials in the processing sector.

“It has caused a great deal of business disruption,” Close said.

“The farmers are hesitant to sell cattle to JBS in Brazil on security reasons. That has enabled the other processors in Brazil to buy cattle at radically lower prices.”

This market turbulence might encourage Argentina, Uruguay and Paraguay to elbow into some of Brazil’s overseas markets.

Brazil was allowed to ship fresh and frozen beef to the U.S. That stopped when inspections uncovered irregularities in the cuts, including injection site abscesses where cattle had been vaccinated for foot-and-mouth disease.

“There was a higher than normal amount of rejects, and the U.S. has now put a ban on fresh and frozen beef from Brazil,” he said.

The central government recently banned the sale of cattle and water buffalo for slaughter, and the Hindus are not going to back down on the issue, said Close.

No one knows where this is going and what the fate of the herd might be or how it might negatively affect the Indian economy.

Beef supplies are lower than normal because of drought in recent years, so exports are down about five percent. However, sales to China and Japan remain strong.

More cattle have been placed on feed with more than 40 percent of the total slaughter coming from feedlots.

New Zealand remains a big exporter with the U.S. being a prime destination, but China is the second largest market and grew by 28 percent last year.

It exported 607,000 tonnes, but this is down about one percent because of a lower cow kill. Dairy prices are strong so fewer culls are entering the market.

Imports are up 17 percent. Imported beef sells for nearly half the price of domestic product.

Brazil is the main supplier of beef, but Argentina and Uruguay are also joining as suppliers. If India’s slaughter ban continues, more beef will come from South America to make up the difference.

Close said new players are em-erging, and he predicts Mexico and Indonesia will develop more prominant positions as major beef producers.

Indonesia offers tropical type cattle, but Mexico is raising cattle similar to Canada and the U.S.

Mexico could export a record 285,000 tonnes, up 10 percent from last year. About 85,000 tonnes went to the U.S., but the bigger market is feeder cattle with more than 500,000 going to American feedlots.

“Mexico is modernizing their beef production processing facilities,” he said. “I think Mexico has potential to be a major North American player and even a global player.”

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