ULTRECHT, The Netherlands – During Q2 2012, Rabobank said there will be downside price risks in cattle/beef markets because it predicts there will be a slightly larger global supply, primarily through Brazil and other Southern Hemisphere countries, in a relatively weak global economy.
Cattle prices for the rest of the year, however, should recover as markets shift from the short-term supply bulge (primarily Brazil) to materially lower supplies as the majority of the beef producing countries are going through liquidation, a retention cycle or weather-related problems, Rabobank said. A significant rise in prices, however, may be limited by weak economic growth, which in turn could trigger shifts towards less expensive protein sources, primarily in the developing world.
Rabobank predicts that longer term, global meat protein — particularly beef supplies — will continue to decrease behind income and population growth in important emerging markets. As a result, this situation will support prices — but at the same time raising volume and cost risks to processors and price risks to buyers.
The lean finely textured beef (LFTB) situation in the US during the past month has disrupted that market. Rabobank estimates LFTB accounts for less than 2 percent of the US beef supply. Weeks of media accounts questioning the safety and wholesomeness of LFTB, a safe product using a process that was proven safe and wholesome many years ago, has resulted in lower US fed cattle and US beef prices, Rabobank claims. As a result, more lean beef trimmings are expected to be imported into the US, primarily by Australia and New Zealand, resulting in the US being a net beef importer.