McDonald’s will start sourcing verified sustainable beef in 2016. With McDonald’s buying less than 2 percent of the world’s beef, the restaurant chain’s move is viewed as more symbolic than structural, Rabobank analysts said.
But it does signal beef’s move into the consumer trend for sustainably produced food, the analysts said in Rabobank’s Global Beef Quarterly 4Q report released Monday. McDonald’s – along with major beef players JBS, Cargill and Walmart – have supported the Global Roundtable for Sustainable Beef, as well as some other regional “sustainable beef” initiatives. And 2016 should reveal which other companies follow suit, said analysts with Rabobank, a global financial services provider for agriculture and agribusiness.
The U.S. and China will be the main import markets to watch in 2016, the quarterly report said, also identifying Australia, Brazil, India and the U.S. as the key exporters to watch – in particular the supply of cattle and beef in response to rebuilding pressures at different points in the cycle.
Factors creating large amounts of uncertainty and volatility in the U.S. in the second half of 2015 are expected to ease in 2016, analysts forecast in the report.
Despite a slowing economy, China should continue to play a critical role in the global beef market, analysts said.
“The introduction of live cattle trade for slaughter or feeding in China provides domestic players the opportunity to offer imports as fresh chilled beef to retail markets, claiming a premium over traditional imports of frozen meat,” Angus Gidley-Baird, senior animal protein analysts for Rabobank, said.
New provinces and players in China will join live cattle imports in 2006, analysts predicted, although volumes will be restricted by low cattle availability from Australia, the report said.
Other highlights from the report:
* Brazil is expected to access the U.S. fresh beef market in 2016, which not only would provide access to the U.S. but would also facilitate entry to other markets. Overall, Brazil is expected to increase exports by about 6 percent in 2016.
* Likewise, Argentine beef exports are expected to enter a growth cycle, with the potential for significant export increases starting in 2016.
* After consecutive years of record production and exports, Australian cattle supplies tightened considerably in October and November. Reduced herd numbers coupled with continuing dry conditions suggest slaughter numbers could drop 15 to 20 percent in the coming year, with exports sliding by 20 percent. Still, Australia remains the biggest beef supplier to China.
* Total shipments of Canadian cattle to the U.S. year-to-date are down 31 percent compared to last year.
* The 2016 outlook remains generally positive for the European Union, with domestic beef consumption expected to be up 1.3 percent in 2015 and EU exports forecast to increase an estimated 7.5 percent by year’s end.
In the U.S., huge daily price swings in the futures market and wild corrective swings are making basis calculations difficult and price discovery uncertain, the report said. Looking ahead, ongoing herd rebuilding will maintain tight supplies in 2016, with prices expected to remain firm, analysts said.