May 18, 2021
Changing fortunes for world beef market suppliers
Brazil, India, America, and Argentina led 2020's export growth –but the latter two grow no more beef today than they did 20 years ago.
By Eric J. Brooks
An eFeedLink Hot Topic
The world beef trade successfully navigated through the coronavirus crisis but has never been more dependent on the fortunes of just one country. Falling 1.5% to 60.522 million tonnes due to 2020's COVID-19 related processing disruptions, the USDA projects world beef output to rebound 1.6%, nearly equaling its 2019 level of 61.54 million tonnes. From 2013 through 2019 (before COVID-19), production grew 1.1% annually, nearly keeping pace with world population growth.
Thanks to China and its satellite economies of Hong Kong and Taiwan, buying significantly more beef, exports fell a mere 0.9% or 85,000 tonnes, to 10.805 million. Without these three nations, exports would have endured a steep 8%, 866,000-tonne plunge to 10.034 million tonnes.
Among top beef exporters, no clear pattern or synchronized market cycle exists at this time: Some nations are boosting output while others cut back sharply.
For Australia, a late 2018 to 2020 drought coincided with high cattle prices, causing an 11.3%, 2.96 million head cattle herd culling over three years to 23.217 million head in 2021.
This made 2021 Australian beef output plunge 15.3% over three years (to 2.06 million tonnes) and exports a whopping 20.1% (to 1.284 million tonnes). Outbound shipments are at their lowest level since 2003. Late 2020's return of abundant rainfall promises a post-2021 recovery in herd and export volumes. Even so, a return to record high 2 million tonne export volumes will take at least several years of good weather.
Neighboring New Zealand's dry 2020 conditions and high, China-bound export prices caused slaughter rates to run 22% above 2015-19 average levels. The resulting herd depletion will make beef output fall 6.3% from 2020's record 727,000 tonnes back to 681,000 tonnes. 2021 export shipments are falling 6%, from 2020's record 638,000 tonnes to a USDA estimated 600,000 tonnes.
In Argentina, plunging beef consumption made domestic cattle prices fall below the cost of corn and calves. Thereafter, corn and calves increased as quickly as cattle prices. Only high prices offered by Chinese beef importers kept output from falling more than it did.
This will induce a 4% fall in 2021's beef production to 3.1 million tonnes and 7.2%, 60,000-tonne drop in exports to 770,000 tonnes – but there is considerable downside risk in Argentina's beef trade: In mid-April, Argentina established a beef export registry "to avoid possible imbalances in the domestic meat market in terms of supply, price, and quality."
Farmers fear that this beef export registry will be followed by export restrictions or export taxes. That could make Argentine beef exports miss their USDA projected 2021 estimate of 770,000 tonnes by up to several hundred thousand tonnes.
Fortunately for beef buyers, lower Australian, New Zealand, and Argentine output are counterbalanced by rising exports from Brazil(+7.3%), America(+6.4%), and India(+7.1%).
After six slack years, high cattle prices motivated a rapid expansion of Indian buffalo and dairy cattle herds. The latter's rapid herd expansion frees up more buffaloes for slaughter and beef production.
This coincides with a pause in new cattle slaughtering restrictions, which held back growth after 2014. With cattle slaughter constrained and beef consumption rising, exports declined 36.5%, from 2.02 million tonnes in 2014 to 1.284 million last year.
Improved market conditions mean 2021 Indian beef output will rebound 6.4%, back to 4 million tonnes. Exports will rise 7.1% to 1.375 million tonnes, their first increase since 2017.
In America, high cattle prices, strong export demand, and a constant 94.5 million head herd size are boosting slaughter rates. The resulting 1.8%, 222,000-tonne rise in 2021 beef output to 12.6 million tonnes finally breaks the 12.47 million tonne record set in 2002. With domestic consumption staying flat, the USDA conservatively projects 2021 exports rising 6.4% to 1.43 million tonnes. Given the possibility of disrupted Argentine shipments, shipments could rise more than 10% and exceed 1.5 million tonnes.
Nevertheless, the greatest beneficiary of restricted Argentine beef exports would be Brazil. Abundant, low-cost feed gives Brazilians the most elastic, market-responsive cattle herd of any major supplier. Exports are USDA projected to rise from 2.54 to 2.73 million tonnes but could easily approach 3 million tonnes if Argentina's government drastically limits shipments. The strong export performance is fortunate for Brazilian cattle farms, where a 200,000-tonne rise in beef production over two years is not being met with higher domestic consumption.
Going forward, the nations with the most potential to expand cattle herds, beef production, and exports remain Brazil, Australia, and Argentina. India notwithstanding, western beef suppliers face the same dilemma: Too much economic dependency on China and too little beef consumption in their mature domestic markets.
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