World beef consumption is up, and prices are favorable, but production is up, and pressure on beef and cattle markets is beginning to mount, said Rabobank Senior Analyst for Animal Protein Angus Gridley-Baird in a quarterly analysis of the beef market.
“US weather conditions, low protein prices in Brazil and changes to live cattle and carabeef trading in Asia have the potential to change the course of the global market,” Gridley-Baird said in the report.
DRY WEATHER EFFECTS
Dry weather disrupted the US market through the winter and spring, the report said. This cut the grazing potential significantly and sent calves to the feedlots sooner than producers would have liked and drove cattle on feed higher from September through February.
Ongoing drought also threatens to increase beef cow slaughter numbers, which currently track 10% higher for the year through mid-April, compared with 2017, Rabobank said.
The revised forecast of 5% production growth in 2018 still holds true, with the early-placed cattle on feed now starting to be marketed.
Escalating feed costs will affect the cost of gain and will limit carcass weight increases.
Disruptions in fed cattle marketings were expected to continue through August and reduce fall fed cattle supplies through the fourth quarter.
Rabobank said 20 states holding 70% of US beef cows currently suffer from measurable drought stress. Eight states that contain 34% of the cow herd were classified by the National Oceanic and Atmospheric Administration with extreme to exceptional drought.
RISING BRAZIL PRODUCTION
Brazil’s poultry and pork exports declined recently while its beef supply grew, increasing the availability of animal protein and pressuring domestic prices.
First-quarter 2018 Brazilian beef exports grew 20%. Poultry and pork will need to adjust supply to account for the reduced market access before there is stability in local prices.
Last year, proponents of live cattle trade between China and Australia believed 100,000 head could be transported this year, the report said. The first shipment of 1,600 moved in January, and the economics of the deal look favorable as Australian prices fall.
Selling Australian cattle to China might set off a shuffle of Southeast Asian beef procurement, Rabobank said, even though 100,000 head can be considered small compared with China’s 7.1-million-tonne production.
Indonesia imported 100,000 tonnes of carabeef (water buffalo meat) from India that easily would account for 100,000 cattle diverted to China, and Indonesia could become a major market for India with more potentially permanent supply chains, the report said.
As major exporters Brazil, the US and Australia increase export volume and global production rises, supply pressure will build, according to the report. Producers and market players will need to avoid the potential pitfalls and to overcome the challenges as they arise.
CATTLE, BEEF RECAP
No cattle sold Wednesday on the Livestock Exchange Video Auction, compared with sales three weeks previous at $122.40 per cwt.
Cash cattle trading last week took place at mostly $110 per cwt on a live basis with a few in Iowa at $111, down $5 to $7 from the previous week. Dressed-basis trading took place at $177 per cwt, down $7 to $8. However, many sellers declined the bids.
The USDA choice cutout Friday was down $1.57 per cwt at $227.43, while select was off $0.31 at $204.62. The choice/select spread narrowed to $22.81 from $24.07 with 74 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Thursday, was $136.04 per cwt, up $1.60. This compares with Friday’s May settlement of $144.92, up $1.62, and the Sep settlement of $144.45, up $1.35.