July 3, 2017

Beef market 'disruptions' could change trade flows - report

A series of "market disruptions" that occurred in major bovine-exporting countries through the second quarter has the potential to cause material shifts in global trade, according to the Rabobank's second beef quarterly report this year.

These disruptions are the political upheaval in Brazil, a new trade agreement between the US and China, and proposed bans on slaughter in India:

"While US exports continue to perform strongly (and have now reached record levels), reduced supply from Australia and New Zealand, along with potential shocks from Brazil and India, could see the balance in the beef market shift back to a supply-limited market", said Angus Gidley-Baird, Rabobank senior analyst for animal protein.

The second-quarter beef report said Brazil's meat sector was rocked by two political events in the first quarter following the Brazilian federal police's investigation in March into irregularities in meat inspections.

The so-called tainted-meat scandal resulted in most of Brazil's importing countries placing temporary restrictions on Brazilian meat imports (they have since been lifted). In May, Brazil's largest beef processor was also caught up in political scandal.

Brazilian beef exports, as a result, dropped by around 10% year-on-year in the first five months, opening space in the global beef market, and the recent drop in cattle prices may lead to a future reduction in production, the report said.

In early June, the Indian federal government issued a directive that would ban the sale of cattle, including buffalo, in notified livestock markets for non-agricultural purposes—which would include the sale of cattle for slaughter. "As India is one of the largest global bovine exporters, any ban on slaughter would have enormous global impact", the agricultural lender said. 

The Rabobank's seven-nation beef index, meanwhile, remained relatively stable up to May, bumping around the 165-point mark for the past 12 months.