October 3, 2008

Brazil's cattle prices ease after a year of price increases

Brazil and Uruguay's cattle prices have eased in terms of US dollar during the second half of this year, after continuous price increases in 2007-08.

The easing of prices come as a result of a weak US dollar, high global demand and tight supplies.

Despite Brazilian cattle prices increasing 42 percent between January and June in Sao Paulo, prices have since slumped 16 percent. This decrease is due to the resistance by local consumers to high retail prices, seasonal feedlot cattle entering the market and the fall in the value of the Brazilian real.

As this year's feedlot output is lower than predicted (further restraining tight supplies) and the depreciation of the real is likely to intensify exports, prices are not expected to fall much further, unless the currency makes another major adjustment.

Since last year, Brazil's rising cattle prices (influenced by the appreciation of the real) had decreased the competitive price advantage faced by Brazilian beef in export markets and levelled the playing field for Australian beef in markets shared with Brazil. With the easing of prices in Brazil, Australian products are once again placed under competitive pressures.

Heavy steer prices in Uruguay increased 60 percent so far in 2008, peaking at 190 US cents per kg lwt in August as a result of strong export volumes and prices. Due to low demand from Russia and the EU, along with processor's resistance to high cattle prices and reduced cattle  demand, prices have dropped 10 percent over the last five weeks.

In Argentina, cattle prices remain stable and well below those in Brazil and Uruguay, as the industry is highly controlled and exports are partially banned.