US will need beef in 2012
STEVE KAY
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.
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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.
