Meat processor Vion already indicated in July that supply and demand are also out of balance in our country. The slaughterhouse mainly pointed to the limited supply of animals. This is due to the number of entrepreneurs in Dutch livestock farming who have stopped. However, the slaughterhouse did not dare to make any predictions about the course of prices in the rest of the year. In the Netherlands, however, prices for cattle for slaughter have increased further in recent months.
Short supply, high prices
The number of cattle slaughters has been at low levels throughout the year. Although the supply of cattle for slaughter has seasonally increased slightly in recent months, it remains below the level of last year and the 5-year averages.
Prices for slaughter cattle are historically at very high levels. For example, the quotation for slaughter bulls of quality E on the Bunnik cattle market stands at an average of almost €5 per kilo.
The pricing here – as with many other products – also partly depends on what takes place on the world market. And the conditions there also seem to favor higher prices at the moment.
China demands and drives up prices
One of the main drivers of high beef prices is China. This country has imported huge amounts last year. Beef consumption has picked up considerably recently, especially during the period when pork was only available to a limited extent (due to African swine fever). However, it seems that beef will continue to be popular among Chinese consumers, even now that pork is widely available again.
A handful of countries rule the world beef market
This explanation from analysts is supported by the import figures. The volume of beef imported has increased from 1 million tons in 2018 to 2 million tons in 2020. An import volume of 2.2 million tons is expected for this year. The US Department of Agriculture also sees steady growth in the coming years: around 8% per year. The enormous suction power of the Chinese market thus continues to exert an influence.
A handful of countries rule the world beef market. Brazil, India, Australia and the United States are by far the largest exporters. Brazil exported about 2.5 million tons of beef last year. The other three countries all accounted for a volume of about 1.4 million tons. This is followed by a group of countries that last year accounted for volumes of between 400,000 and 700,000 tons: Argentina, New Zealand, Canada and Uruguay. Almost all of them benefit from the increased demand from Asia.
At the same time, production is lagging behind demand. According to the United States Department of Agriculture, world production shrank by nearly 1 million tons last year, bringing it to 57.66 million tons. Small growth is expected for this year, although supply is still lagging behind demand. In 2022, the world supply could grow by about 500,000 tons, according to the most recent forecast. But as consumption keeps pace with growth, it is unlikely to negatively affect price formation. However, in the long term, the increase in production in Australia may increase competition on sales channels in Asia.
Trade issues and diseases disrupt relationships
What influences trade flows and price formation in the beef market outside the laws of supply and demand are disrupted trade relations as a result of various political conflicts or outbreaks of animal diseases. A number of cases have had a significant impact on individual countries this year.
Australia, for example, has seen a significant drop in exports to China. China scrapped a number of large meat processors ‘down under’ last year. Officially due to defective labeling of products and substances found in the meat that are not allowed in China. However, the political relationship between China and Australia has been tense for some time and it cannot be ruled out that China wants to reinforce the words with an import ban on a large series of Australian goods.
In addition to those tensions, the recent finding of BSE in two Brazilian cows is something that has made exporters in that country shivering. Beef exports from Brazil to China were suspended in September. Since only these two cases were found, it was expected that trade would resume soon. However, that is still not the case. Brazil is one of China’s most important suppliers. Should the situation last longer, this could offer opportunities for other exporters.
This article is part of the content collaboration between Foordlog, Foodbusiness and Boerenbusiness.