SAN DIEGO, Calif. — Global beef production and trade are becoming a complex web with new players vying for position and mature markets looking for ways to sustain themselves.
Brazil and China are two countries to watch, Rabobank agribusiness analysts Don Close and Matt Costello said during the National Cattlemen’s Beef Association’s Jan. 26-29 convention in San Diego.
Brazil is stepping up production of corn and livestock while China needs to import more to feed 1.4 billion people.
“We think the competition for global trade is going to increase,” said Close, but the U.S. will retain an important position.
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“Our expectation is that the U.S. market will continue to be the global centerpiece for high quality beef production.”
Strong live cattle and beef prices in the United States in 2014-15 sent a signal around the world to in-crease production, particularly when the beef cut-out value reached a record $259 per hundredweight in July 2015.
However, the increase in beef prices was not all due to demand. It also rallied because of reduced competition as porcine epidemic diarrhea hurt U.S. hog barns and avian influenza struck poultry producers.
“We knew this big rally was coming and we were really quick to take the credit that it was all driven by food demand, and that really wasn’t the case,” he said.
“There was a decline in total animal protein domestically, not beef demand only. I think there was a bit of an exaggerated price signal sent to the U.S. and globally.”
The repeal of country-of-origin labelling legislation in the United States will be positive in North America, and Mexico is expected to take advantage by exporting more feeders to the U.S. Canada has been slow to expand its herd, but some female retention appears to be happening.
Trade agreements are key to greater market access.
New Zealand has been the benchmark for successful market access by achieving bilateral trade agreements with numerous countries. There were no tariffs on New Zealand beef shipped to China last year.
Australia has been able to successfully complete free trade agreements with Japan, South Korea and China, so tariffs have immediately started to come down.
The Trans-Pacific Partnership deal is critical for the agriculture sectors in North America, they said. The agreement will be officially signed in New Zealand Feb. 8, but the U.S. Congress must then agree, and that may not happen until after the November federal elections.
Exporters such as the U.S. need to look at the success of countries like Australia, which can offer traceability as well as hormone and ractopamine-free beef. When a new opportunity opens, Australia is there.
The country has been quick to take advantage of the growing Chinese taste for beef. Australian exports to China have increased by 360 percent since 2013.
Trade in this region can be a complicated proposition.
Chinese beef imports are rising, with Uruguay and Australia the main beneficiaries of the new access, said Costello.
Official imports were minimal from 2009-12, but Hong Kong and Vietnam imported considerable amounts of beef from a variety of sources, which was probably redistributed to China.
“When you look at how much they import, particularly from India, there is just no way they can eat that much beef,” said Costello.
China has been more open to beef imports since 2013. Numerous cases of food fraud have scandalized the public, so imports are often viewed as safer. Most recently, it was discovered that rat meat was being sold as beef and mutton, said Costello.
Rabobank predicts China will be the largest beef importer within this decade, but it is not wide open. It imports 20 percent of its beef requirements with the majority coming from Australia Argentina, Brazil, Canada, New Zealand and Uruguay.
“We thought it would be an open door to everybody. That simply has not been the case,” said Close.
However, Australia is facing cutbacks in its beef supply because of a massive herd liquidation following two years of drought.
The national herd expanded to 30 million head from 2010-12 when rain was plentiful, but drought has now forced producers to cut back to 25 million head.
Slaughter numbers are down, so less beef will be offered for the next three to five years.
However, the country will continue to export 70 percent of its beef.
Brazil and Argentina are expected to start exporting fresh and frozen beef to the United States later this year. Canada has already said it will accept Argentine beef.
Brazil is in growth mode with 200 million head of cattle. Last year it exported 1.7 million tonnes of beef, and by 2023 exports could increase by another million tonnes, said Close.
Corn production is also up, and Brazil is expected to start placing more cattle in feedlots every year. Ten percent of the herd goes on feed into lots with 2,000 to 20,000 head capacity. The cattle are fed for shorter periods of 90 days, said Close.
More beef will be available for sale, although most will still be raised on extensive pasture systems. Many of the cattle carry Nelore influence, so the beef is a different quality than British or Continental breeds.
Brazil is cost competitive, with abundant feed supplies, low labour costs and a weak currency.
“Can they beat us on price? I think they probably will,” said Close.
Uruguay is expected to reduce its herd numbers because of over-supply. It is also starting to increase its fed beef production and is building a strong customer base in China, the U.S., Israel, Chile and the European Union.
The European quota system requires exports of beef from cattle younger than 30 months that are fed a grain diet for 100 days before slaughter. As a result, Uruguay is expected to expand its feeding sector.
India is the world’s largest exporter of beef, but the meat is derived from water buffalo and trades at a 30 to 50 percent discount to other beef. This market is expected to stay the same or grow.
Close said it is hard to determine what is happening in India. The government does not provide many statistics in terms of bovine numbers, processing or internal religious disagreements over the processing of beef.
