Cattle herd numbers have yet to recover from consecutive years of drought and herd liquidation, but as beef supplies remain tight and beef prices remain high, consumer are becoming disgruntled.
A new Rabobank report shows global beef supplies are steady with 2012 levels as herd sizes in the United States remain light and drought conditions drive the cattle market lower in Australia and New Zealand.
Rabobank analyst Albert Vernooij says economic forces are leading consumers to take a second look at budgets and question the relative value proposition for beef compared to the cheaper alternatives of chicken and pork.
“The broader picture for demand still points to tempered consumer appetite to paying high prices for beef as increases in disposable income worldwide appear to be slowing and threats of inflation continue across the globe,” Vernooij said.
Rabobank’s Global Cattle Price Index shows cattle prices are six percent lower In May compared to Q1 led by lower prices in the major export countries of Australia and Brazil. A stronger U.S. dollar has also pushed global cattle prices lower.
Vernooij expects cattle prices to increase in the European Union as supplies tighten on higher demand from consumers and companies replacing horsemeat with ‘real’ beef following the media attention in Europe earlier this year. South American countries are in the process of rebuilding herds, but demand in Brazil may be limited as pork and poultry prices are falling
Cash prices in the U.S. will likely remain near $120 over the summer before moving around the $130 level in the second half of the year. Until prices improve, feedlots are facing higher feed costs brought on by adverse weather.
Bloomberg reports U.S. beef processors have experienced a drop in operations with low herd sizes bringing fewer cattle to slaughter in the Southwest. Cargill has already closed one of its beef-processing plants in Texas and could close another plant elsewhere in the U.S. if numbers don’t improve.
“Industry relief will come when the drought breaks, input costs moderate from their current levels and herd expansion takes place,” Mike Martin, a Cargill spokesman, told Bloomberg.