A combination of global and localised factors is creating a “very tight” global beef cattle market – with strong demand and record high prices in many regions throughout the world – and this is coinciding with a fundamental shift in international market dynamics, Rabobank says in a newly-released report.
In its Q2 Beef Quarterly report, the agribusiness banking specialist says so tight is the global beef market that localised disruptions – including droughts and increases in consumer demand in individual countries or regions – are now exerting a much more “dramatic impact” on global trade.
“Given the growth in demand (for beef) and global trade, pressures created in the system now mean that what may once have been considered slightly-abnormal seasonal conditions (for example) are now causing major shifts to markets,” the report says.
Report co-author, Rabobank senior animal proteins analyst Angus Gidley-Baird (right) says the local drivers that are fuelling high beef and cattle prices in individual countries – such as post-drought herd rebuilding in Australia and a re-opening food service sector in the US – will eventually correct and cause an adjustment in prices.
“However, with the tight global supply situation – underpinned by Chinese demand which is expected to remain firm – we believe the global market has seen a fundamental step up,” he said.
The record low cattle supply in Australia has also been feeding into the tight global market, the report says, with successive years of drought and large livestock liquidation having resulted in the country’s lowest beef cattle herd in 30 years.
Australian young cattle prices had jumped almost 30 per cent year on year in February 2020 and since risen another 20 per cent to February 2021, the report noted.
Mr Gidley-Baird said the cattle price increases had been significantly driven by improved seasonal conditions in 2020 which were carrying into the current year. These had seen intense buying competition by producers looking to restock properties and generate value out of increased pasture production.
In an indication that the Australian sector might be beginning to see producer demand for cattle ease, the balance of buyers in the weaner cattle market is starting to return to normal, the report says.
“The ‘pendulum appears to be swinging’ with a more normal balance beginning to return, with producers dropping back and feeders taking a more active share of the market, seeing a greater percentage of cattle heading to feedlots,” Mr Gidley-Baird said.