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Wednesday, 28 December 2016 09:06

Beef outlook 2017

Rising supplies of beef are exerting downward pressure on global prices with this trend expected to continue in 2017, according to a new industry report.

In its newly released Beef Quarterly report, Rabobank says the global beef market will continue to grow in 2017, led by strong growth out of Brazil, Argentina and the US.
This is likely to keep global prices low, the report says, identifying four key developments that will influence global beef trade in the coming year.
Report co-author Rabobank senior animal proteins analyst Angus Gidley-Baird says while softer global prices will exert some pressure on Australian beef prices, they are likely to remain well above the five-year average.
“In contrast to what we are seeing globally, Australian production is set to ease slightly in 2017 – to its lowest level in more than a decade – as the domestic herd continues to rebuild after years of drought,” he says.
“And it is this constrained local supply, together with restocker demand, that is expected to create a floor in the domestic beef market.”
Australia’s beef exports are also expected to remain low, Mr Gidley-Baird says, with volumes to the US and China down considerably on last year’s levels.
“In the first 10 months of this year, we have seen our beef exports to the US fall by 44 per cent year-on-year, while into China they have dropped by 36 per cent.” he says.
“South Korea has bucked the trend, with exports up by four per cent, to remain a key market for Australian product.”
The Rabobank report identifies four key developments that will influence global beef trade in 2017 – South American growth, space in the US market, China’s demand and growth in South-East Asia.
“On balance, these developments will keep a lid on global prices next year, with the capacity of the market to balance this growth in supply relying heavily on demand out of Asia,” Mr Gidley-Baird says.
Gidley-Baird says much of this increased competition in the global marketplace will come out of South America, with Brazilian beef supply expected to be up by three per cent in 2017.
“This will see their export program ramp up next year, with Brazil recently gaining access to the US market and looking to pursue access into Japan,” he says. “Argentina is also set to increase their beef production, which could quickly flow into higher exports.”
Meanwhile Gidley-Baird says the anticipated three per cent increase in US beef production in 2017, and the willingness of the US consumer to absorb this volume, will have ramifications not only in the US but across global beef markets.
“It will be challenging for higher supplies in the US to find relief in increased exports, particularly if the US dollar remains at current levels,” he says.
“While their domestic market is also expected to be highly competitive, not only by imports but locally-produced competing proteins.”
The Rabobank report says the capacity of the global beef market to balance the growth in supply out of the Americas will rely heavily on increased demand, particularly out of Asia.
“China is expected to continue to absorb a large proportion of rising global supplies, with their import program set to increase in 2017,” Gidley-Baird says.
He warns that demand growth remains slow in certain segments of the Chinese market and competition into China could ease, with the US expected to start shipping frozen beef into China.
“South-East Asia remains a ‘shining light’ for global beef trade with demand increasing rapidly.
“That said, consumers in South-East Asia remain price sensitive and much of their demand will continue to be fulfilled by domestic cattle, live imports and imported bovine from India.”

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