“Over the past two years, retail beef prices have been phenomenal,” the report says, largely driven by strong consumer demand and some supply shocks.
Much of this increase in prices was caused by “demand pull”, Rabobank senior animal protein analyst Angus Gidley-Baird said, driven by increased consumer appetite for beef due to factors including lockdown restrictions, additional disposable incomes from COVID-19 stimulus packages and (in the case of China and African swine fever in pork) limitations on the availability of alternative proteins.
“With beef supply unable to keep up, the increase in demand has created an imbalance in the market and, as a result, beef prices have lifted,” Mr Gidley-Baird said.
He said in many cases, the increases in retail beef prices were among the largest in history.
Inflationary pressures
However, the report warns that inflationary pressures are building in the beef supply chain, with labour, freight and energy costs among the largest to see increases, along with feed.
“Some of the cost pressures — such as freight, energy and feed — are cyclical and over time are expected to decline, allowing for some easing in 2022,” Mr Gidley-Baird said.
“However, a number of cost increases — those associated with labour and sustainability, for example — will be permanent and will need to be accommodated within the supply chain.”
Russia-Ukraine impact
The report says the Russia-Ukraine conflict is not expected to have a major impact on global beef markets, given Russia has a less prominent role in markets compared with five years ago.
Russia only accounts for about five per cent of global beef imports, with its major suppliers being Paraguay, Brazil and Argentina.
However, indirect impacts are possible.
“Increased energy, fertiliser and feed costs as a result of the conflict could all impact the beef supply chain and, with Russia and Ukraine accounting for 29 per cent of global wheat exports, any trade embargoes could pressure feed prices,” Mr Gidley-Baird said.
Closer to home
For Australia, the report says, “encouraging rains” across central, northern and eastern Australia in the first two months of 2022 will support cattle production in the largest producing states.
“After a number of dry years in northern Australia, we expect these rains to stimulate restocking and herd rebuilding, adding further producer demand to an already strong cattle market,” Mr Gidley-Baird said.
Australian cattle prices remained strong, supported by ongoing producer demand for restocking, coupled with the limited availability of cattle, the report said.
Cattle processing had a slow start for the year, with Omicron cases in the community impacting the labour force.
“For the first five weeks of 2022, east coast weekly cattle slaughter in Australia was nine per cent below the same period last year and 40 per cent below the five-year average,” Mr Gidley-Baird said.
Australian beef exports ended 2021 down 15 per cent on 2020 volumes, the report said.
The largest declines were to the United States (down 31 per cent), China (down 25 per cent) and Japan (down 13 per cent).
Live exports followed a similar trend — down 27 per cent overall.