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World demanding cheaper beef cuts

Posted by Flora Sawita Labels: Beef, Cattle and Livestock, Meat

Prices for young cattle will stay strong, but all other cattle prices should fall in 2012-13, according to ABARES.

ABARES says the saleyard price is likely to move from 330 cents a kilogram in 2011-12 to 325 c/kg in 2012-13.

It says more cattle will be slaughtered and exports of expensive cuts of beef will decline. ABARES predicts it will be overtaken by a greater demand for low value cuts in international markets.

The export value of livestock and livestock products is forecast to increase by 3.6 per cent in 2012-13 to $15.3 billion.

Beef and veal exports are expected to rise just 1 per cent next financial year to $4.5 billion, with world prices tipped to fall by 2 per cent.

Main overseas markets

Australia's heavily dependent on three major markets to take nearly two thirds of the high quality beef; Japan, the US and South Korea.

ABARES says Japan's beef consumption has stagnated and cheaper US beef is replacing Australian product. Australia's exports to Japan are forecast to fall by four per cent in 2011-12 and two per cent in 2012-13.

In the US, there is increased competition from Canada, Mexico and Brazil, where freight costs are cheaper. Despite this, exports to the US should rise by 6 per cent a year, for the next two years.

Korea continues to be a strong market for Australia as demand grows by 5 per cent this year and two per cent in 2012-13. But other suppliers, like the US and Canada are making inroads into this lucrative market.

The important emerging markets

Demand in South East Asia, although not Indonesia, is growing as incomes rise. Beef exports to these markets are tipped to take a third of Australia's beef products by 2016-17, but it's largely for cheaper cuts and a lower unit value than prime cuts.

Dwindling live exports

Live cattle exports overall are expected to fall a substantial 31 per cent in 2011-12 to 500,000 head in total.

Indonesia's restrictions on cattle imports will continue to push light steer and heifer prices down in northern Australia in 2012-13. If Indonesia holds to its quota, then Australia's exports to those ports will fall by a third to 330,000 head, this financial year.

Alternative markets like Turkey, Malaysia and the Philippines are increasingly looking to other suppliers for live cattle.

Australia's cattle herd to reach record numbers

The number of beef cattle is projected to increase to 29.1 million 2013-14, which would be the largest herd since the mid 80's. ABARES predicts that number would push saleyard prices down over the medium term.

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Mexico’s Meat Exports Surge 41% in 2011

Posted by Flora Sawita Labels: Beef, Export, Meat, Mexico

Mexico’s meat exports surged 41 percent in 2011, thanks to growth in sales to Japan, Angola, Benin, Ghana, Kazakhstan and Nigeria, the Agriculture Secretariat said.

Mexico exported 210,325 tons of meat worth $937 million in 2011, up from the 149,136 tons exported the previous year, the secretariat said.

The improvement in exports was due “to the joint efforts of producers and the federal and state governments to maintain the health status that sets Mexico apart,” the secretariat said in a statement.

Japan became the top buyer of Mexican meat in 2011, importing 78,292 tons, followed by the United States, with 66,463 tons; Russia, with 28,541 tons; and South Korea, with 16,217 tons, the secretariat said.

Meat exports originated in 19 of Mexico’s 32 states, led by Sonora, Michoacan, Sinaloa, Yucatan, Jalisco, Baja California and Nuevo Leon, “whose health conditions have been fully certified by the authorities,” the secretariat said.

Mexico exports meat and meat byproducts to 33 countries in the Americas, Europe, Africa and Asia, with the leading markets being Japan, the United States, Russia and South Korea, the secretariat said.

Beef exports totaled $532 million, pork sales totaled $323 million, poultry exports totaled $16 million, sales of other types of meat totaled $34 million and sales of meat byproducts totaled $32 million. EFE

Latin America

Herald Tribune

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Beef demand key to cattle prices in 2012

Posted by Flora Sawita Labels: Beef, Cattle and Livestock, Meat, Prices

Beef and cattle prices increased to new record levels in 2011 and are expected to push even higher in 2012.

Several years of declining cattle inventories culminated in late 2011 with a projected 3.0 percent decrease in slaughter that combined with lighter carcass weights to result in a 3.8 percent less beef in the fourth quarter of 2011 compared to a year earlier. For 2012, slaughter is forecast to drop another 5-plus percent and, even with an expected increase in carcass weights, will result in a nearly 4 percent drop in beef production for the year. Decreasing beef production ensures that wholesale and retail beef prices will be pushed even higher in 2012. Cattle supplies that are even tighter, on a relative basis, likewise ensure that fed and feeder prices will be pushed to the limit and maintain strong negative pressure on feedlot, packing and retail margins. Weather conditions that determine whether the drought in the South continues or abates will determine whether feeder cattle supplies remain merely very tight or move to extremely tight should heifer retention accelerate in 2012.

While supply is clearly the main driver pushing cattle and beef prices upward, it is consumer beef demand that will determine just how far prices will go. It is not really a question of whether prices will be higher but rather a question of how much higher. Ignoring trade for a moment (though it continues to play an increasingly important role in the U.S. beef industry), it is domestic demand that is the biggest unknown in 2012. Consumer demand for beef (or indeed any product) is a combination of "willingness" and "ability" to purchase a given quantity of a product at a given price. Typically, when nothing else changes, consumers will pay higher prices when quantity is less and will only purchases greater quantities at lower prices. Declining beef production in 2012 already suggests higher prices for this reason.

However, other factors can change that affect the overall level of demand. Among the "willingness" factors for beef is the underlying desire that consumers have for beef or what are commonly referred to as the preferences for a product. There is no significant indication that consumer preferences for beef have declined. Even as consumers have been forced to adjust spending patterns in recent years (discussed below), beef preferences remain strong. However, beef is not one product but many different products and there are questions of whether consumer preferences have changed in terms of the mix of beef products desired. Steak, though still popular, may be viewed now by consumers as more of a special occasion meal, while ground beef demand continues to grow, including demand for premium ground beef products. It will take time before the extent and permanency of these apparent changes in preferences is determined.

Other short-run factors may also affect willingness to purchase beef products. Consumer decisions are driven by value, which is a combination of preferences and price of a product relative to other products that may be substitutes. In the case of beef, these are other meat products, mostly pork and poultry. Therefore, beef demand at any point in time, will be determined in part by the prices of pork and poultry relative to beef. In 2011, pork prices, like beef, moved to new record levels thus maintaining a relative balance between beef and pork prices. Through the first 11 months of 2011, retail beef and pork prices both increased about 10 percent year over year. During the same period, retail broiler prices increased only about 2 percent. This is another sign of strong beef preferences relative to chicken. Anticipated decreases in broiler production in 2012 should support broiler prices and provide additional support for higher beef prices.

Since 2008, the "ability" part of beef demand has played a bigger role in beef demand than for many years prior. The recession of 2008 and 2009 caused significant adjustments in consumer spending and may have permanently changed spending patterns. Macroeconomic measures provide a general backdrop for consumer spending ability. Post-recessionary GDP growth in 2010 was followed by weaker than expected growth in 2011in the U.S. economy and many other countries as well. The tsunami in Japan and the continuing fragile economic situation in the Euro area limited global growth. General expectations for 2012 are for continued anemic macroeconomic performance in the U.S. and most major developed and developing countries.

In the U.S., unemployment, though down from recessionary peaks, remains stubbornly high with little decrease through most of 2011. Inflation-adjusted personal disposable income decreased slightly from 2010 levels in the second and third quarters of 2011. Data for the fourth quarter are not yet available. However, personal savings rates, which jumped sharply during and immediately after the recession, fell back to a more modest level in late 2011 and likely supported additional consumer spending. Anecdotal indications of strong holiday spending suggest that consumers have adjusted to the post-recession environment. Recent stories of large winter crowds at vacation venues such as Disney World are indications that consumers are moving past recession-induced retrenchment to more typical consumption, albeit with continued belt-tightening. Beef middle meat prices improved noticeably in the last quarter of 2011 and the Restaurant Performance Index, which has improved erratically during the recovery, moved towards a strong finish for the year with the latest November data.

Cattle and beef prices will be higher in 2012 but just how much higher depends on consumer demand. Continued fragility of the U.S., as well as the global, economy make demand the biggest question mark for the beef industry in the New Year. Though consumer preferences for beef remain strong, they may have changed. Consumer reaction to higher prices may result in additional changes in demand for middle meats relative to end meats and for away-from-home versus at-home beef consumption. In the absence of major U.S. or global macroeconomic weakness, beef demand is sufficiently strong to support higher beef and cattle prices in 2012 but exactly how that demand will be manifest across different cuts and qualities of beef remains to be seen.

By Derrell S. Peel

OSU Extension Livestock Marketing Specialist

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Beef demand key to cattle prices in 2012

Posted by Flora Sawita Labels: Beef, Cattle and Livestock, Meat, Prices

Beef and cattle prices increased to new record levels in 2011 and are expected to push even higher in 2012.

By Derrell S. Peel

OSU Extension Livestock Marketing Specialist

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Global Cattle Outlook for 2012

Posted by Flora Sawita Labels: Beef, Cattle and Livestock, China, Japan, Meat, New Zealand and Australia, UN and FAO, USA

US will need beef in 2012

STEVE KAY

(Stock and Land) CATTLE producers the world over are great survivors.

The beef industries in most of the major beef-producing countries have endured everything from BSE to drought to floods in the past decade.

These and other calamities forced some producers out of the business.

But those who remain are on the brink of one of the brightest five- to 10-year periods in many years.

Why such a bright outlook? The answer is simple. Global beef demand is outstripping available supplies and will continue to do so for the foreseeable future.

Latest data from the US Department of Agriculture (USDA) indicate global cattle numbers in 2012, at 1.018 billion head, will be up only 0.6 per cent from 2011 and that global beef production will remain flat at 56.8 million tonnes.

Conversely, global demand for beef continues to grow – that is, people are paying more for beef.

That’s good news for US and Australian producers.

Solid evidence of this comes from JBS SA, the world’s largest beef exporter.

It reported average export prices from JBS USA (which included its Australian operations) were up 22.3pc in its 2011 first quarter on the year earlier quarter.

Prices were up 21.9pc in the second quarter and 19.3pc in the third quarter.

Tyson Foods, the largest US beef packer by sales, does not break up export prices.

But its average selling price for beef in its fiscal 2011 (which ended October 1) was up 16.9pc from fiscal 2010.

The fundamentals will be even stronger in 2012 than in 2011.

Kobe Beef: A Delicacy of Japan

Key Asian markets such as Japan and South Korea will experience positive gross domestic product (GDP) growth, helping a further improvement in beef demand.

Then there’s China, which is likely to start taking North American beef, further tightening that supply in other markets.

People historically have improved their diets, and begun to include meat in them, as their level of disposable income increases.

It is little surprise that the Food and Agriculture Organisation (FAO) of the United Nations recently forecast global meat consumption to increase 73pc by 2050, and dairy consumption to grow 58pc.

Significantly, FAO said a lot of the future demand for livestock production would be satisfied only by large-scale, intensive animal-rearing operations.

As it stands, there are no technically or economically viable alternatives to intensive production for providing the bulk of the livestock food supply for growing cities, says FAO.

Go tell that to the Luddites (yes, we have some in America) who would like agriculture to return to the days of 40 acres and a mule. That’s way in the future. What about tomorrow?

As I wrote in my October column, the dilemma for the US is its national cattle herd continues to shrink just as domestic and global beef demand improves.

Moreover, reduced production, more exports and fewer imports mean that per capita beef supplies in the US continue to decline.

The US cattle herd shrank in 2011 for the fifth straight year.

USDA forecast the January 1, 2012, total to be 91.45 million head, although private forecasts are closer to 91 million head.

This means US beef production will likely decline 2.5pc in 2012.

USDA expects imports to increase by 2pc to 2.09 billion pounds, as tight

global beef supplies will continue.

USDA has beef exports in 2012 up only 0.6pc on 2011, although other estimates have them up 6pc.

Whatever the number, total available beef supplies in the US will be lower and will raise the question of “where’s the beef” that I posed in October.

USDA forecast supplies in 2012 at 54.1 pounds per person, versus 57.6 pounds in 2011 and 59.6 pounds in 2010.

The 2012 supply will be the lowest in at least 61 years.

The implications for Australian producers are clear. The US will need your beef more than ever.

We’re hoping you keep expanding your herds and that the Australian dollar weakens enough to make the US market more attractive for your exports.

We can’t do much about the exchange rate but maybe record high prices for lean, manufacturing beef will help.

Prices will stay at record highs throughout 2012 because of the hamburger boom since the 2008 recession and the growth of specialty hamburger chains.

I know Australia is doing its part so far, at least if we believe the cattle numbers projected by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).

It said the Aussie herd was set to reach a 34-year high in 2011-12, at 30.2 million head.

ABARES expects herd rebuilding to continue on the back of the better seasonal conditions, with producers retaining breeding stock.

Your cattle numbers might increase slightly more if Indonesia follows through with its decision to cut its imports of live Australian cattle to 283,000 head from 520,000 head.

I daresay some producers, and live cattle exporters, will be hurt by this.

Conversely, Australian packers will be happy to have a few more cattle.

And as I’ve said, the US meat trade will welcome any more beef coming out of Australia in 2012.

* Steve Kay is the editor of US publication Cattle Buyers Weekly.