Beef processing consolidation expected to ramp-up
July 20, 2011
by Meat&Poultry Staff
NEW YORK – Although global beef prices are expected to hold steady in the midterm, another significant price increase could trigger substitution of beef by other proteins, according to Rabobank's Q2 2011 Beef Quarterly Food & Agribusiness Research and Advisory (FAR) report.
Other study findings include finished cattle availability is still tight throughout the world, due to cattle herd rebuilding in many producing countries after years of cow liquidation and sustained unprofitability in grain-fed markets; and natural disasters are adversely affecting the Japanese beef market, drastically reducing local production due to livestock losses and disruption to markets; although, demand was less severely impacted than production.
The US became a net exporter of beef in 2011 due to a lower US dollar, robust global demand driven by supply challenges in Japan and Korea and contracting imports. Softening demand in the EU and US, however, is a concern.
Concerns are also renewed among Euro regions regarding fiscal difficulties in Greece, and the resultant dampening consumer confidence; meanwhile, higher gas prices and reduced growth are hampering US demand prospects, as well as an increase in unemployment and fears of a double dip in the US housing market.
The decline in global beef cattle inventories vs. processing capacity will likely lead to a renewed wave of industry consolidation and rationalization in primary beef processing, the report also states.