Dry weather has disrupted the US market since late 2017, compounded by lower-than-normal precipitation over the winter, which negatively impacted grazing. These pressures forced lightweight calves into feed yards and consequently drove US cattle on feed higher from September to February. The disruptions in fed cattle are expected to continue through August and reduce fed cattle supplies through the fourth quarter.
Rabobank said 20 states currently suffer from measurable drought stress and 70 percent of beef cows reside in states with drought stress. Eight states that contain 34 percent of the cow herd rate at extreme to exceptional drought.
Outside the US, Brazil’s poultry and pork exports declined while its beef supply grew, creating a large availability of animal protein. This put pressure on prices in the domestic market, and if it continues, could push the beef industry in Brazil to seek more trade opportunities in international markets. Brazilian beef exports grew 20 percent during the first quarter of this year. Poultry and pork will need to adjust supply to account for the reduced market access before there is stability in local prices.
Last year, proponents of live cattle trade between China and Australia believed 100,000 head could be transported in 2018. The first shipment of 1,600 left Australia in January. The live cattle supply chain facing challenging protocols that require slaughter within 14 days of arrival, can be overcome by using e-commerce as a selling platform, according to Rabobank. The economics of the deal look favorable as prices in Australia fall.
Redirecting Australian cattle to China might set off a shuffle of Southeast Asian beef procurement, even though 100,000 head can be considered small compared to China’s 7.1 million metric ton production. Indonesia announced an import of 100,000 metric tons of carabeef (water buffalo meat) from India that would easily account for 100,000 cattle diverted to China. It would also see Indonesia become a major market for India with more potentially permanent supply chains.
As major exporters Brazil, the US and Australia increase export volume and global production rises, supply pressure will build, according to the report. Producers and market players will need to avoid the potential pitfalls and to overcome the challenges as they arise.