The Rabobank Global Cattle price Index has recovered slightly from Q4 but remains 8% down YOY

19-4-2013 — / — According to a report by Rabobank, the European horsemeat scandal has had hardly any impact on consumer demand and resulting beef prices. The outlook for the global beef industry is mixed, but overall global beef production is likely to remain constrained and demand is set to weaken in the face of growing inflation across the globe.

EU beef prices stabilised in Q1 2013 despite the outbreak of the horsemeat scandal. Rabobank analyst Albert Vernooij said:  “The horsemeat issue was one of mislabeling rather than food safety, which means it has had limited impact on consumer demand. Furthermore, contamination incidents were discovered only in processed products. The result is that even in the horse-loving UK, consumers remain confident in the quality of fresh beef.” The report states that the only lasting challenge for the industry created by the scandal will be to meet more stringent tracking and tracing standards which are expected to be introduced by governments, processors and retail foodservice players. Vernooij added:  “This regulatory response, coupled with a lower availability of beef in the coming years, could trigger a significant increase in the number of dedicated supply chains.”Prices in the US beef complex have been a big disappointment in Q1. A strong US dollar (especially relative to the Japanese Yen) and trade issues with Russia have contributed to a 12% decline in exports. Retail beef sales have been weak, with increases in social security tax and rising gasoline prices impacting levels of disposable income. Winter storms have significantly reduced restaurant foot traffic, further weakening consumer demand. The combination of this low export and domestic demand with high grain prices, less than anticipated declines in beef slaughter and subsequent beef production, has resulted in losses to cattle feeders of USD 100 – 200 a head.

The outlook for the rest of the global beef industry is mixed:

  • Latin America – companies in Brazil, Uruguay and Paraguay are expected to deliver reasonable margins as the beef/cattle ration has increased due to higher availability of live animals and buoyant exports.
  • Australia & New Zealand – prices have declined on the back of unfavorable weather conditions which has led to increased throughput at the processer level. Whilst this is bad news for ranchers and feedlots, the packing segment will continue to profit in this environment.
  • China – imports from Australia and New Zealand have soared. The reason is flat production rates (farmers continue to show little enthusiasm for the herd expansion, the capital requirements and high disease risk inhibit investment) which are failing to meet domestic demand. Furthermore the tightening of the grey channel will increase the need to import beef through formal channels.

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