China drives surge in Brazilian beef prices

The effect supplying beef to China has had on global beef markets recently is most dramatically reflected in Brazil since the start of November.

Between Friday 1 November and last Friday, 22 November, steer prices shot up from the equivalent of 253c/kg to the equivalent of 329c/kg, just 15c/kg below the Irish R3 steer price.

Unprecedented demand from China is the main explanation for this massive price increase. Up until September this year, Brazil had 16 factories approved for beef exports to China.

Since then, a further 24 have been added and this has increased Brazil’s capacity to supply Chinese beef import demand. In 2018, Brazil was exporting on average 20,000t of beef to China but last September this increased to over 40,000t, a record.

Then when the October figures were released by the Brazilian Association of Meat Exporting Industries (ABIEC), it was revealed that a huge 65,827t of beef was exported.

It isn’t just Brazil that has shown dramatic growth in beef exports to China this year. New Zealand’s exports in the year ending September 2019 were 171,309t, up from 93,306 for the previous year.

Australia supplied just over 260,000t for the year ending September a 63% increase while Argentina’s exports almost doubled to 315,000t for the same period. The other main supplier, Uruguay, also increased its exports to China by 31% to reach close to 275,000t.

Reason for unprecedented demand

Demand for beef imports in China was on a sharp upward curve in recent years increasing from 70,000t in 2012 to 300,000t in 2014 and 1m tonnes last year. This strong demand has been added to in recent months by the scarcity of pigmeat caused by the African swine fever outbreak, which has decimated the Chinese pig herd and indeed the pig herd in surrounding Asian countries.

The USDA forecasts that Chinese pigmeat production will fall to 34,000m tonnes in 2020 compared with 54,000m tonnes in 2018. This drop of 20m tonnes is more than twice the total pigmeat (8.4m tonnes) that was traded on world markets in 2018, according to USDA figures.

This has meant Chinese imports are hoovering up all available supply that is being traded globally, driving grade E pig prices to almost 187c/kg last week, up 35% since this time last year (Bord Bia). With insufficient pigmeat traded to meet this demand, there is spillover into a surge in demand for all types of meat.

Irish and EU prices

So far, the Chinese driven global price surge has passed Ireland by. Elsewhere in Europe, prices are edging upwards with the EU average R3 young bull price 360c/kg for the week ending 16 September compared with 356c/kg two weeks earlier.

The most impressive increase has been the Northern Irish price, up the equivalent of 10ckg over the two weeks for R3 steers to the equivalent of 385c/kg, a huge 40c/kg more than the average south of the border.

Global prices

The increases in recent weeks have been holding, with Uruguay the best performer at the equivalent of 455c/kg, particularly impressive for a country that exports 75% of its beef production.

The US cattle price is holding but the real story there is the continued surge in prices for imported 95cl manufacturing beef.

According to the USDA, the value of Australian and New Zealand imports of this product was the equivalent of between 661c/kg and 673c/kg on 22 November, which is a jump of more than €2/kg since this time last year.

Most Irish factories are now approved to supply China and the US market for manufacturing beef has been open since 2016. There is also a strong market in Britain and equally good demand for cattle from factories in Northern Ireland. Of course, factories will highlight that they have had to deal with the overhang of the summer factory protests but with markets clearly buoyant, Irish farmers will be asking when they are going to get a dividend from these improving markets?