March 25, 2014

Rabobank: Good demand and feed prices favour US beef

Stable feed prices, coupled with strong Chinese demand, has US beef producers on target for an exceptional year, according to Rabobank analysts.

However, US beef is in a tightening phase, with beef production expected to be down 5% to 6%, a huge contraction in 2014; current cattle prices are an incentive for slaughter but also for cow and heifer retention, said Bill Cordingley, managing director and chief of Rabobank agribusiness research and advisory group.

The challenge to the beef complex will be consumer access to beef and price competition from pork and poultry; the price advantage ground beef had over chicken breast has closed due to a tightening of lean meat for grinding - that tightening is a function of reduced cow slaughter and reduced lean imports, he said.

Some traditional US imports of lean meat have been redirected to China due to China's demand for the product: China imported 140,000 tonnes of beef from Australia in 2013, up from 14,000 tonnes in 2012, he said.

With beef markets so tight and prices are so high, the US government is considering allowing fresh beef from Brazil on the basis of regional freedom from foot and mouth disease, he said.

An upside pressure for beef is that the Porcine Epidemic Diarrhoea (PED) virus in US swine will limit growth in the pork industry; red meat prices remain robust, which is supportive for poultry, and could allow poultry to take more market share, he said.

Cordingley was talking to Charles McElligott, Rabobank's western region managing director, before his presentation on global commodity markets to clients at a dinner in Twin Falls, Idaho on March 4.

Rabobank officials were speaking to clients about global commodity markets in terms of price and outlook while touring the Northwest. The tour made a stop in Twin Falls on March 4.