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- Rabobank reports in its Q1 Global Beef Quarterly that global beef prices reach its highest peak in five years as increased costs put pressure on the supply chain
- Sharp increase in prices driven by increased consumer appetite and limitations on availability of alternative proteins
- While some costs like freight and feed are expected to decline, costs like labour are expected to increase sharply which will be absorbed by retail price
- Beef exports in 2021 have declined by nine percent in the same period as last year and 40 per cent below the five-year average
- However, “encouraging rains” across different parts of Australia in the first two months of 2022 will support cattle production which will help ease increased demand for beef locally
Rabobank has reported in their Q1 Global Beef Quarterly that global beef prices have reached its highest peak in five years as increased costs puts pressure on key beef-producing regions.
However, the specialist agribusiness bank reports that the strong consumer demand and willingness of consumers to pay “top dollar” for beef is not going away anytime soon.
Rabobank senior animal protein analyst Angus Gidley-Baird has attributed the increase in prices to be driven by increased consumer appetite for beef due to a variety of factors, from lockdown restrictions to limitations on availability of alternative proteins.
“With beef supply unable to keep up, the increase in demand has created an imbalance in the market, and as a result, beef prices have lifted,” he said.
The report warns that inflationary pressures are building in the beef supply chain as labour, freight and energy costs have increased sharply.
Mr Gidley-Baird believes, however, that these cost increases will be permanent and need to be “accomodated”, and passing that burden onto retail pricing.
He notes that some of the cost pressures like energy and feed are expected to decline and ease some pressures in 2022.
In Australia, the report notes that beef exports in 2021 were down by 15 per cent from 2020 – a significant slow start for the year due to the labour force being impacted by the Omicron outbreak.
“For the first five weeks of 2022, east coast weekly cattle slaughter in Australia was nine per cent below the same period last year and 40 per cent below the five-year average.”
The largest declines reported were to the US which was down by 31 per cent, China (down 25 per cent) and Japan (down 13 per cent).
Live exports were reported to be down 27 per cent, following a similar trend overall, with volumes to Indonesia down 13 per cent and to Vietnam down 44 per cent.
It is reported that “encouraging rains” across central, northern and eastern Australia in the first two months of 2022 will support cattle production in the largest producing states – a silver lining amidst the grim report.
“After a number of dry years in northern Australia, we expect these rains to stimulate restocking and herd rebuilding, adding further producer demand to an already strong cattle market.
“Such restocking will also support increased production in the years to come.”
The report note that the ongoing Russia-Ukraine conflict is not expected to have a major impact on the global beef market as Russia only accounts for approximately five per cent of beef imports, but indirect impacts on the supply chain are possible.
“Increased energy, fertiliser and feed costs as a result of the conflict could all impact the beef supply chain and, with Russia and Ukraine accounting for 29 per cent of global wheat exports, any trade embargoes could pressure feed prices,” Mr Gidley-Baird adds.
“The general uncertainty – along with slower global growth and inflation – could also see an erosion of consumer confidence which may result in an easing of consumer demand for beef.”
