December 15, 2012

 

 

US beef and cattle prices will increase to record highs in 2013 due to smaller supplies, with slaughter-ready cattle likely to trade at US$140-145 per cwt next spring.

 

This is according to the quarterly beef report of Rabobank on Thursday (Dec 13).

 

A drought and record-high feed grain prices caused US cattle producers to shrink herds in 2012, resulting in less beef as well as record high beef and cattle prices.

 

"To date, consumer demand for beef has held remarkably well. It will be critical to see if consumers stay committed to beef with additional record prices expected in 2013," the report said.

 

US slaughter-ready cattle traded a record US$130 per cwt in March of this year. First quarter US beef production next year was forecast at 5.84 billion pounds, down 7% from a year earlier and second quarter production was estimated at 6.15 billion pounds, down 5%, it said.

 

In addition to fewer cattle, Rabobank said high feed costs will have producers selling cattle at lighter weights, which will produce less beef per animal.

 

Global beef production in 2013 should be similar to 2012, with increases in Argentina, Australia and Brazil offsetting declines in the US and Europe. Australia's beef production is seen up 2% next year, Argentina's up 4%, and Brazil's up 3%.

 

"On the demand side of the equation, the broader picture points to another year of relatively weak consumption on the back of still sluggish economy, as world GDP is expected to grow only slightly in 2013," Rabobank analyst Guilherme Melo said in a statement.

 

Beef companies in North America and Europe may have a difficult time passing on the higher cattle costs to consumers, the report said. While South American beef exports may be tested by political and economic changes in their Middle East and North Africa markets. Global beef producers may benefit from less poultry as high feed costs should curb that production.

 

"To the extent that this increases poultry prices, it may also benefit the beef industry as the gap between beef and chicken prices narrow and possibly shifts demand towards beef," Rabobank said.