Trade uncertainty, including the U.S.-China trade war, Brexit and new Mercosur access to the European Union, were the dominant themes in global beef during the 2019 third quarter, according to Rabobank’s "Beef Quarterly Q3 2019" report.

“The supply position in the U.S. remains solid, while supply in Australia and New Zealand is tight but improving in Brazil,” Rabobank senior animal protein analyst Angus Gidley-Baird said.

Even with tensions high, the report said beef demand in China pushed up imports by more than 50% year over year in the first half 2019.

While beef demand is strong, Gidley-Baird reported that beef production globally is coming under increasing scrutiny due to its impact on animals and the environment. “The past 12 months have seen a marked increase in beef supply chain responses to such scrutiny, and we expect even more in the coming 12 months,” he said.

Rabobank expects this pace of change surrounding sustainability in beef supply chains to increase further. The market will continue to be the main driver of change in most parts of the world, supported by the actions of governments, non-government organizations, pressure groups and investors, as well as the rise of alternative proteins.

Global snapshot

Rabobank provided a glimpse into the global beef outlook and highlighted recent key developments.

The report touched on a development in early June in which the EU agreed to grant the U.S. a defined portion of the bloc's 45,000 million metric ton global grain-fed beef import quota.

“If ratified, the U.S. will secure an agreed 18,500 mmt of the quota, increasing to 35,000 mmt over the next seven years,” the report explained.

In June, however, the European Commission also agreed to a new trade deal with Mercosur countries (Brazil, Argentina, Paraguay and Uruguay). If ratified, Rabobank said Mercosor would get a new 99,000 mmt quota of beef at a 7.5% tariff that's phased in over five years.

Australia continues to jostle for global market share but was dealt a setback recently after beef exports to China triggered the 172,400 mmt safeguard in mid-August, resulting in an increase in tariffs. It is understood that tariff lines doubled back to levels prior to the free trade agreement, the bank noted.

Rabobank said the government of Indonesia is reportedly now allowing at import quota of 10,000 mmt of Brazilian beef this year after losing a World Trade Organization dispute brought by Brazil. This threatens strong gains made by the U.S. this year. As of July, Indonesia had imported 5,148 mmt of U.S. beef, a 32% increase from the same period last year.

Rabobank said its Seven-Nation Cattle Price Index bumped between 115 and 120 through the first seven months of 2019. From May to July, prices in the U.S. have declined, while prices in Australia, New Zealand and Uruguay have risen.

Market recap

October live cattle futures contracts were mostly lower following the long holiday weekend. Contracts closed lower Tuesday at $99.275/cwt. and fell again Wednesday and into Thursday’s lower close of $97.875/cwt.

October feeder cattle futures posted strong gains Tuesday and Wednesday, closing at $132.10/cwt. and $133.425/cwt., respectively. By Thursday’s close, however, contracts had fallen to $132.325/cwt.

Beef cutout prices were slightly lower this week. The Choice cutout closed higher Thursday at $229.42/cwt., while Select closed lower at $204.47/cwt.

October lean hog futures rallied Tuesday to a close of $66.525/cwt. The gains continued Wednesday and fell only slightly Thursday, closing at $66.30/cwt.

The pork cutout was mixed this this week, with the wholesale pork cutout closing at $71.96/cwt. Loins and hams were $71.10/cwt. and $58.21/cwt., respectively. Bellies were lower at $105.43/cwt.

Hogs delivered to the western Corn Belt were lower, closing Thursday at $53.84/cwt.

The U.S. Department of Agriculture reported the Eastern Region whole broiler/fryer weighted average price on Aug. 30 at 78.87 cents/lb.

According to USDA, egg prices were steady, with a steady to lower undertone. Supplies were light to moderate. Demand was light to fairly good.

Large eggs delivered to the Northeast were slightly higher at $1.09-1.13 cents/doz. Prices in the Southeast and Midwest were also higher, at $1.13-1.16 cents/doz. and $1.01-1.04/doz., respectively. Large eggs delivered to California were $1.61/doz.

For turkeys, USDA said the market was steady to firm, and demand was light to moderate. The price range for hens and toms was slightly higher on the lower end of the range, at 88-95 cents/lb.