The USDA Foreign Agricultural Service (FAS) has reduced its global beef production forecast for 2021.

The organisation’s July forecast predicts 60.8m tonnes carcase weight equivalent (cwe) total global production in 2021, 715,000t less than the April forecast.

This reflects the pattern of less supply in Ireland, UK and EU revealed in Bord Bia’s midyear webinar, as reported by Adam Woods here.

The decline in these three major beef producing countries is greater than the increased production in the US, Canada and New Zealand

The main explanation offered is decline in output from Brazil, Argentina and Australia, where production is predicted to be at a 23-year low as the herd is being rebuilt following drought.

The decline in these three major beef producing countries is greater than the increased production in the US, Canada and New Zealand, meaning an overall reduction in global beef production of 1% in 2021.

USDA/FAS also updated its April forecast on the volume of beef that will be traded in 2021. It shows a 3% decline, down from 11.1m tonnes to 10.75m tonnes cwe.

Less beef for trade

Since the last USDA/FAS update, the main development has been the political decision in Argentina to suspend beef exports for a month. This has been succeeded by a policy that restricts exports of certain cuts to 50% of 2020 levels.

Even though steak meat to the EU is excluded from this, it means that the July forecast estimates that Argentina’s exports will be 90,000t cwe lower than previously forecast at 680,000t.

More beef will be available from the US, where the export forecast for 2021 is now put at 1.55m tonnes cwe

Australia’s exports are also forecast to be lower by 90,000t cwe, as herd rebuilding continues. However, the biggest revision is in respect of Brazil, where beef exports are now forecast at 2.4m tonnes cwe for 2021 compared to a 2.725m tonnes in the April forecast.

More beef will be available from the US, where the export forecast for 2021 is now put at 1.55m tonnes cwe, a 125,000t increase on the April forecast. Canada is expected to increase exports by 50,000t.

Beef importers

China and Hong Kong will account for over one-third of all beef imports in 2021 according to USDA/FAS, though the revised forecast of 3,475m tonnes cwe is 185,000t lower than the April forecast.

This is the outworking of reduced supply availability from Brazil, Argentina and Australia as Chinese demand for beef remains robust.

Elsewhere, minor adjustments are expected in the other big Asian markets of Japan and South Korea

Up to end of May 2021 China imported over 150,000t more beef compared with the same period in 2020, according to Chinese customs, so any reduction in the remainder of the year is likely to be supply driven as opposed to reduced demand.

Elsewhere, minor adjustments are expected in the other big Asian markets of Japan and South Korea, while the US beef import forecast has been increased by 55,000t on the April forecast.

Cattle prices

South American countries are the lowest-cost beef producers in the world and in the middle of last year, prices in Brazil were trundling along at the equivalent of €2.30/kg and it was similar in Argentina.

By June 2021, this had increased to the equivalent of €3.50/kg due to a combination of increased prices in Brazil plus the Brazilian currency recovering some of the value it had lost against the euro over recent years. The current value is around €3.40/kg.

Prices are falling in Argentina with the import restriction.

New Zealand’s beef prices at €3.38/kg are also better than a year ago while the US farmgate price of €3.68/kg is based on a kill-out percentage of 63%

Currency is a major factor in South America, where the Argentinean peso has collapsed and while Brazil’s real hasn’t collapsed to the same extent, it is worth just over half its value in euro compared with five years ago.

New Zealand’s beef prices at €3.38/kg are also better than a year ago while the US farmgate price of €3.68/kg is based on a kill-out percentage of 63% which would translate to a price close to €4.00/kg when compared to Ireland’s dressing spec.

Australia is an outlier because of serious scarcity and with a farmgate price the equivalent of €4.50/kg for a Meat Standards Australia graded steer, it will not be flooding the global market with cheap beef.

Comment

Global trends have significant effect on Irish beef trade

With only 10% of Irish beef exported outside of Europe, farmers may be inclined to dismiss what is going on in global beef markets.

However, while these markets have minimal direct impact, they have huge indirect impact, especially at a time when Irish, British and EU supply is limited as explained by Adam Woods here.

Beef production, unlike pig and sheepmeat, takes longer to recover when supplies reduce for any reason. In time output from Brazil and Australia will recover but that will be 2022 if not 2023 in the case of Australia. Uncertainty about Argentina is likely to continue into next year as well.

The other important variable is demand for beef. Indications are that this will remain strong in China and other Asian markets.

Demand has been exceptional in the UK and EU, driven by retail during lockdown and sustained through reopening of hospitality and a recent month-long festival of football.

If this demand or close to it can be sustained in what will be a period of restricted supply, it will be good news for Irish farmers.