As figure 1 shows, beef prices in Brazil have been on an upward surge that has gathered momentum over recent weeks. It began in August with slow but steady increases up to the beginning of October since when price increases have accelerated.

The driver has been a short term tightening of cattle supply combined with strong global demand for Brazilian beef exports.

China, the main export destination for Brazilian beef exports is on schedule to take 1m tonnes this year and the price they have been willing to pay has increased steadily over recent months.

According to ABIEC data, the value of Brazil’s beef exports per tonne has increased from $4,410 per tonne in July to 4,510 per tonne in September and there are reports of further increases in October.

Markets

As well as China being a strong market for Brazil’s beef exports, they have also benefited from record import demand from the US. Up to last week, Brazil supplied 147,194 tonnes of US beef imports, an increase of 78% on the 82,814 tonnes supplied for the same period last year. This reflects a growth in overall demand for beef imports in the US with the total volume imported for the same period up 18% on the same period last year at just under 1.2m tonnes.

While Brazil has moved from the lowest beef price among major beef exporting nations, they remain particularly competitive as other major beef exporting countries have all had a higher farm gate beef price over recent months.

The scarcity of cattle supply for factories has meant a prolonged period of US farm gate beef price being around the equivalent of €6/kg. This has had a negative impact on the bottom line of the major US beef processors but has been welcomed by farmers.

Australia

Australia, the world’s second largest beef exporter this year has completed a period of herd rebuilding and cattle numbers are now at or close to their peak with MLA reporting that in fact a period of destocking has begun as heifers are currently making up 52% of the national kill. Their farm gate beef price has rebounded from its low point of the equivalent of €2.58/kg for steers a year ago to €3.85/kg at present, just ahead of the increasing price being paid in Brazil.

As with Brazil export demand is underpinning price particularly from the US where Australia enjoys a tariff free 420,000 tonne beef quota. Australian exporters are taking full advantage of this with US beef imports from Australia at 310,000 tonnes for the year to date, up 70% from the 184,000 tonnes imported for the same period last year.

Comment

So how does all this benefit Irish beef producers as we aren’t major beef exporters to countries that are major customers for either Brazil or Australia. Basically it comes down to the fact that rising tides lift all boats.

Irish farm gate beef prices may continue to lag well behind UK prices but they are currently 60c/kg better than they were this week last year. Beef demand has been consistently strong in the UK and mainland Europe this year and would be an attractive market to global exporters if they had a low beef price and weak demand elsewhere.

The fact that the US and Asian markets are strong enough to support stronger beef prices in Brazil, the US and Australia means that they aren’t as attracted to Europe for the moment at least and probably the immediate future.