Global beef market remains strong, new report finds
By: Sydney Sheffield
According to a new report by Rabobank, the third quarter outlook for the global beef market remains robust. Most beef retail prices continued their upward trend in quarter two or remained steady. Although quarter two, prices did not rise much above quarter one, as most are sitting between 5% and 11% higher than quarter two in 2021. However, this trend could change depending on consumers spending in the remainder of the year due to the economic unrest.
"The positives today are a strong job market, and the fact that incomes aren't rolling over yet like we'd see in a full-on recession,” said Lance Zimmerman, North American beef analyst with Rabobank. “We may see weaker demand the next several years due to these factors, but the supply will be tight enough to be supportive of our market and may even lead to price increases."
Global demand for cheaper cuts of beef is expected to increase in the year ahead as rampant inflation and slowing economic growth see consumers trade down. The report forecasts the volume of trimmings, the cheaper meat cuts which remain after prime cuts are removed, consumed globally to remain strong and potentially increase in the second half of 2022 as consumers continue to make economic decisions to purchase lower-value beef cuts and cheaper proteins. Trimmings are typically used in the production of ground or minced beef.
“Major importers of trimmings include the US, China, Japan, and South Korea,” the report says. “With these countries facing slower economic conditions in the second half of 2022, we expect consumer-purchasing decisions to favor the consumption of trimmings. The US and South Korea face high inflation pressures, whilst China and Japan continue to struggle with slower economic growth off the back of COVID.”
American domestic trimmings production has been increasing, driven by the cow herd liquidation resulting from drought and margin pressure. With a higher volume of domestically produced trimmings available and imported trimmings restricted, the imported trimmings price has remained elevated above the domestic trimmings price. Cold storage facilities in the United States are also currently holding record volumes of beef, which Rabobank believes have been stockpiled by trim buyers in anticipation of the cow cull slowing.
"We are on pace to have a beef cow herd culling rate this year at 13.5%," Zimmerman said. "We've never seen that high of a culling rate. It's an extreme we are going to have to digest and it's a paradigm shifter for analysts who earlier this year believed the odds of revisiting inventory lows of 2014 and 2015 were not likely. Well, they look pretty likely now."
Globally, beef production has been relatively steady. Among the major producing and exporting countries, growth is expected to be in balance through the second quarter of 2023, as expansion in some countries is offset by contraction in others.