US and Brazil beef tsunamis threaten

US and Brazil beef tsunamis threaten

Beef
EYES ON BRAZIL: Brazilian cattle in a feedlot. Should Brazil's beef exports be hit by COVID outbreaks in slaugtherhouses, the ripple effect on global protein prices would be severe, analysts say.

EYES ON BRAZIL: Brazilian cattle in a feedlot. Should Brazil's beef exports be hit by COVID outbreaks in slaugtherhouses, the ripple effect on global protein prices would be severe, analysts say.

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EYCI due back on line this week - 740c/kg tipped

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TWO potential tsunamis in the form of backed up finished cattle in the United States and the possibility of Brazil heading down a similar path are lingering in the background as the impact of the pandemic on the global beef sector is weighed up.

Revised-down global production forecasts and slowing beef demand as economies decline are emerging as key impacts but how things play out in those two big cattle-producing nations could turn all projections upside down.

A flood of beef from the United States when cattle start to move through the processing chain again is likely to have 'severe' repercussions on the global meat scene, analysts say.

So too the ripple effect on international animal protein prices should top exporter Brazil experience big COVID-19 outbreaks in slaughterhouses.

Brazil's processing sector is on high alert, although social security conditions are very different to the US and the possibility of infection is unlikely to hinder processing, analysts say.

Rabobank's latest Beef Quarterly has 2020 global beef production dropping about one per cent on last year's levels.

Slaughter in the US has dropped almost 50 per cent below 2019 levels following plant closures and the backlog of cattle is not expected to be cleared until early next year.

Rabobank said Brazil was currently experiencing drier conditions so supply of animals for slaughter was expected to increase and with domestic consumption declining, exports would increase, particularly given the strong devaluation of its currency.

However, senior Rabobank analyst Angus Gidley-Baird said infection outbreaks in Brazil's processing sector could see that situation change dramatically.

"The sheer volume of the market Brazil occupies would mean any reduction in exports would constrain the global protein market and push all prices higher," he said.

Analyst Simon Quilty reported the US Department of Agriculture was now forecasting 5.5pc less US beef production than last year.

US production had been on track to be higher this year but the COVID infections at abattoirs meant 1.6 million head would now be slaughtered next year. That would push next year's US production up by 6.7pc, or 780,000 metric tonnes, Mr Quilty said.

"That is enough to really force the global market down," he said.

"Australia competes with the US into Japan, Korea, Indonesia - many significant beef markets and they (the US) will have cheaper product."

Meat & Livestock Australia boss Jason Strong believes 'fantastic opportunities' still exist for Australian red meat.

In the weekly MLA On The Ground podcast, Mr Strong said the underlying macro drivers were still in place - strong global demand for protein, a deficit of supply from African swine fever and growth in many markets.

There was no question disruption had occurred and there were challenges to get on top of, particularly in food service and carcase utilisation, he said.

"But we are well set up for next three to five years to be a real purple patch for the red meat industry," he said.

With the cattle market benchmark, the Eastern Young Cattle Indicator, due to make a return this week, Mr Strong said it was expected to open higher than 700 cents a kilogram carcase weight, which was around where it was when shutdown.

He hinted 740c/kg "would be nice to see."

The story US and Brazil beef tsunamis threaten first appeared on Farm Online.

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