Analysing beef’s global juggling act
The US cattle herd dropping to low levels is a “golden goose moment” for Aussie beef farmers, but just how big the egg laid remains to be seen.
If the United States is poised as the “golden goose” in terms of cattle supply and beef pricing, then China is akin to the “rotten egg” of demand which could sway just how much benefit Australia realises from the favourable US outlook.
Data just released for this year shows how global beef sales are starting to be influenced by the troublesome Chinese economy, which has one of the largest beef exporters – and a key competitor to Australia – actively seeking other markets to sell into.
By volume the three biggest beef exporters on the world stage are Brazil, the US and Australia. In December (the last available full analysis) Brazil had a market share of 20 per cent of all beef traded during that month, the US had 14 per cent and Australia had 11 per cent. Not far behind was New Zealand on 6 per cent, according to figures published by Steiner Consulting.
To look at these countries individually:
US: much has been made about the decline in US cattle numbers after extended drought, with the official herd now listed at its lowest since in the 1970s. Analysis forecast US cattle slaughter and production to start falling this year, going lower again in 2025.
Brazil: has entered a stage of herd reduction and as such production and beef supply increased in 2023 and the forecast is for another slight lift in volumes across 2024.
Australia: following three years of herd rebuilding Australia has its biggest herd in 10 years with slaughter tipped to be higher this year as numbers start to stabilise and show a slight decline.
To sum up, the US will have less meat to sell but Brazil and Australia will have more product to move. It is how this interaction between the three plays out which could determine how much benefit Australian cattle producers receive from the US having the smallest cattle herd in decades.
In January there were already signs Brazil has started to shift its focus away from China as its economy struggles and demand slows. In recent years, Brazil has sent more than 60 per cert of its total beef production to China, with other countries only minor players in its sales list.
In its latest market report Steiner Consulting said while shipments of Brazilian beef had increased 13 per cent in January, it was built on sales to other countries not China.
Brazil’s sales to the United Arab Emirates increased to 10,000 tonnes, a big jump on the 500 tonnes sent in January 2023. Likewise, Brazilian shipments to Mexico, Turkey, Egypt and Libya also increased significantly, albeit from a low base.
Steiner Consulting said it was a reaction to changing economic conditions.
“Facing a slowdown in demand from China, Brazil has become more active in other markets,” Len Steiner said.
“And this is not just for beef but pork and chicken as well.”
The slowdown in the Chinese market is a topic of discussion among the Australian meat industry. It was put forward as one of the reasons why the lamb and sheep market had been so volatile in recent times.
Respected commentator CNN Business recently had an in-depth look at the Chinese economy, and said its share market had lost nearly $6 trillion in value in the past three years, with falls continuing this year despite most other major markets rallying.
The Hang Seng share market index has crashed by another 10 per cent this year.
“The stock meltdown has made Chinese markets the world’s worst performers so far this year,” CNN said.
“The world’s second largest economy is plagued by a myriad of problems. They include a record downturn in real estate, deflation, debt, a falling birthrate and shrinking workforce.”
The Chinese problems were raised by Steiner Consulting as an issue at play which is keeping imported grinding beef prices at a wide discount to the rate being paid for domestic US grinding beef.
In US dollar terms the value of 90 chemical lean grinding beef produced in the US has lifted to over 300c/pound to be up nearly 50c on year-ago levels, while imported product has only moved up by 11c. It means there is currently a wide price disparity between homegrown US grinding beef and what imported product is valued at.
The best scenario for Australian producers would be for China to ramp up demand and once again be a dominant player for beef, absorbing more Brazilian (and New Zealand) product.
Steiner Consulting said this would add to the shortfall of grinding beef in the US, potentially closing the price gap between US domestic and imported product.
But if economic conditions worsened and Brazil was forced to continue finding other markets, including pushing more beef into the US, it could erode some of the price potential coming out of the US.
“Could Brazilian beef widen the price spread between US and imported grinding beef?” Mr Steiner theorised.
“Brazil has quota limits into America but the one scenario that could make this possible is a global recession and sharp decline in beef demand in China, forcing Brazil and other South American countries to ship more beef out of quota to the US.”
The bottom line is: the US having a very low cattle herd is a golden goose moment for Australia, but just how big the egg laid depends on global tradition conditions and sale movements.
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