NEW YORK – Rabobank’s Food & Agribusiness Research and Advisory group is forecasting global beef prices will reach record levels in 2013.
Natural recovery of herds in Brazil, Argentina and Australia have lifted global beef supplies and pressured global beef prices in the final quarter of 2012, according to Rabobank. However, prices in the United States and New Zealand have increased, and those increases may not be enough to offset recent surges in production costs. Additionally, placements of cattle on feed are declining.
"We expect to see global supply hovering around 2012 levels, with minor ups and downs being determined by the extent to which the increase in Southern Hemisphere will outpace the reduction in Europe and the US," said Rabobank analyst Guilherme Melo. "On the demand side of the equation, the broader picture points to another year of relatively weak consumption on the back of the still sluggish economy, as world GDP is expected to grow only slightly in 2013.
"The scenario is worse where production is set to decrease, such as North America and Europe, which poses additional pressure for beef companies located in these regions to pass on rising cattle prices to consumers," Melo added. "Additionally, as such countries rely on grains to feed their animals they are likely to see a reduction in their competitiveness in the international market.
"Conversely, companies located in South America, particularly in Brazil, should benefit from herd recovery and the acceleration of the economy, which offer processors an opportunity to increase/sustain their margins," he said. "Nonetheless, headwinds for the South American industry will probably blow from the Middle East and North Africa, where companies are likely to face a tougher environment for expanding exports in 2013.
"This reflects the uncertainties resulting from political and economic changes after the Arab spring and ongoing internal conflicts, which are contributing to weakening activity," Melo concluded.
How well poultry and pork producers strike the supply-demand balance in 2013 has implications for the beef industry. Rabobank said production cuts in the pork and poultry sectors are likely, driven by negative margins on surging prices for feed. Any resulting price increases for pork and poultry products could benefit the beef sector by narrowing the price gap between beef, pork and poultry, Rabobank said.