Rabobank: China reopening opens opportunities for beef

In 2022, retail and farm beef prices broke records in many regions due to increased consumer demand and limited beef supplies. Brazil also achieved record exports and profits in 2022, driven by growing demand from CHINA .

The softening of consumer sentiment and the subsequent decline in beef prices at the end of 2022 spilled over into early 2023. While beef supply conditions are favorable for beef prices, consumer confidence will continue to be tested and affect the profitability of beef producers. China will remain in the spotlight as the world watches how quickly the giant emerges from lockdown amid a slowing economic environment. Demand for beef in China is expected to pick up in the second half of 2023, pushing up global beef prices.

The US will be another focal point. After setting records for both the volume and value of beef exports in 2022, the numbers are starting to reflect a decline in production. The number of beef cows has fallen to its lowest level since 1962, and the number of livestock in feedlots is also showing a decline. The expected drop in US beef production will cause a redistribution of global beef supplies and a general tightening of the market.

Overall beef production is projected to remain solid in the first quarter, with Australian production up 5% and Brazil 2%, almost enough to offset the decline in the US, EU-27 and New Zealand. The supply picture through 2023 is forecast to remain tight as U.S. production falls.

While other countries have lifted most restrictions due to the pandemic by 2022, China has continued to experience disruption due to the virus in addition to the slowdown in the economy. Rabobank predicts that Chinese beef demand will pick up in the second half of the year, pushing up global beef prices.

Thanks to new technologies such as portable ovens and stoves, retail sales of beef have increased, where food service has traditionally been the main distribution channel for beef. This trend and the rapidly growing market for ready meals has led Rabobank to expect an increase in beef consumption in China.

In 2022, China increased beef imports by 15% to 2.68 million tons. it was one of the top three buyers of beef in the US. However, due to reduced supplies from the US, EXPORT growth is likely to slow, leaving room for increased trade from Australia.

After an increase in slaughter volumes in late November and early December, Australia continued to show similar high levels in early February. According to a Rabobank report, cattle slaughter volumes could increase by 10% in 2023.

Brazil is China's largest import supplier and Rabobank expects additional trading opportunities for the South American country in 2023. Brazil has reopened the Mozarlándia plant, which is the largest export facility to China. Eight other factories are awaiting permission to export to China, and 11 factories are awaiting permission to export to Indonesia. Despite Brazil's resources and willingness to trade, a case of bone spongiform encephalopathy (BSE) could affect trade flows. China and the US have temporarily suspended imports of Brazilian beef due to an outbreak of mad cow disease.

Beef production in Europe decreased in 2022 by about 1.3% compared to the previous year. As a result, exports fell by 19% and are likely to remain sluggish in 2023, according to Rabobank.

Mexico, however, is expected to increase production next year. For the past three years, the country has been steadily increasing the number of cows, by 50,000 heads per year. Rabobank forecasts a 2% increase in beef production to almost 2.2 million tonnes. While production is up, beef prices are down. The report notes an 8% drop in the last two months compared to last year.

Tropical Cyclone Gabriel hit New Zealand in mid-February, damaging the country's agriculture, damaging farms and infrastructure and hitting the stock market. While the North Island and upper South Island have been hit hard, the western and southern parts of the South Island remain dry. Rabobank said this would help support cattle prices. Overall, in 2022 New Zealand beef production decreased by 4% to 26,774 tonnes.

Cattle prices continued their downward trend in most regions. The notable exception is the US, where tighter inventories provide price support.

A new report by Rabobank suggests that after a landmark year of record high beef exports in 2022, 2023 will bring easing consumer sentiment and lower beef prices.