Protein production of every kind a must to feed growing population.

Krissa Welshans 1, Feedstuffs Editor

August 15, 2018

5 Min Read
Cattle in Nebraska feedlot
CAPACITY CONSTRAINTS: Expanding beef processing capacity today may be fixing yesterday's problem as cattle cycle turns to lower production. DarcyMaulsby/iStock/Thinkstock.

Don Close, senior analyst of animal protein for Rabobank, has been in the animal protein sector for about 42 years, but he is more optimistic today than he has ever been for animal agriculture -- specifically the North American beef industry.

Speaking at the Kansas State University Ranching Summit this week, he said in all of his years, there hasn’t been a time when there have been so many moving parts or as much “noise” in the market than there is right now.

Still, the U.S. and North America are positioned for the future of global beef trade.

According to Close, the U.S. has been expanding the cow herd going on the fifth year now and has added 6 million head.

“In this cattle cycle, we’re very close to the peak. So, I don’t want to be misleading or confusing. It’s still a commodity market; It’s still a cyclical market. It’s not cash fundamentals that I’m talking about, but it’s where the U.S. and North America are positioned for the future,” he explained.

Why does he believe this? Close said this year he traveled to Australia, one of the largest global beef players, and saw that the severity of the drought is as bad as media reports are saying.

Projections right now are that Australia is going to have to liquidate another 2 million females before weather conditions stabilize, he noted, adding, “It’s a tough situation.”

In terms of the global picture today and regions that bear watching, Close said the three most interesting countries are Mexico, Indonesia and India.

“The reason I say Mexico is [because] the pace in which Mexico is developing commercial cattle feeding and developing commercial beef processing is unbelievable,” Close said. “The technology that they’re implementing in the beef plants in Mexico today is superior to anything I see in the states.”

Going forward, he said, don’t think about the U.S. market exclusively; start thinking the North American market collectively.

While he’s very confident that a successful conclusion will be reached on the renegotiation of the North American Free Trade Agreement, he said he’s not confident in the timeline.

Regarding Indonesia, Close said the country has an agricultural policy that changes about biweekly.

“What happens is that food prices will go up, and consumers will start boycotting and protesting. So, the government will open up imports and bring in a lot of product,” he explained.

The increased products send food prices lower, which Close said spurs farmers to take their turn protesting in the streets -- and that results in the government cutting off the imports.

“It’s just this constant teeter-totter back and forth,” he said.

In 2017, however, Indonesia opened a tariff quota of 50,000 metric tons of carabeef -- or water buffalo meat -- from India. Carrabeef, Close said, sells for about 70% of the international clear prices of 90% lean trim. The quota was expanded to 100,000 metric tons in 2018, he added.

Close said Indonesia historically has been a large importer of Australian feeder cattle, but the success of the carabeef is hindering that now.

As for India, Close explained that both India and China have a population of 1.4 billion people. However, India is one-third of the size of China and has a cattle inventory of 300 million head.

Close explained that this is significant because India’s population is 80% Hindu and 15% Muslim, and the remaining 5% is everyone else.

According to Close, Hindus are currently in control of the government and are anti-animal agriculture. In fact, he said if a person there is caught in possession of fresh meat, they will be jailed. He also has heard stories of livestock traders being beaten and killed.

So, all of India's beef product is exported, mostly to regions nearby that include Vietnam and Egypt.

Where North America shines is that its beef product is around 80% Choice and Prime on an annual basis. “North America is pristinely positioned to be the provider of quality and ultra-high-quality product globally,” Close explained.

India’s growth in the dairy sector, on the other hand, has resulted in an increase in cull cows and male calves that can be sold in the open market. This gives it the advantage in sheer volume of the commodity available for sale, Close explained.

Other major beef exporting countries are going to be constantly tugged by having to decide whether they cut cost to compete with the low-end producer or whether they add all of the bells and whistles to compete with North America, he said. “They are constantly going to be swayed back and forth.”

Population growth

Close said if the estimates are true that the global population will be 9.6 billion people just 30 years from now, then “we had better be producing every level of protein we can.”

In regard to plant-based or lab-grown protein alternatives, Close said, “Go for it.”

However, he added that he agrees with National Cattlemen’s Beef Assn. that the products should be under the U.S. Department of Agriculture’s regulation and that they should meet the same requirements as the meat industry. Additionally, he said the products should not be able to be labeled as beef or meat.

Who the target market should be for those products has been heavily debated within Rabobank, Close said.

Some believe that the target audience should be high-income, highly mobile Millennials, but Close said he believes that generation is too fickle and that by the time the alternative products are actually commercially viable, Millennials will be on to the next new thing.

It’s the 300 million-person emerging middle class from China and Southeast Asia who offers the real potential, he said.

About the Author(s)

Subscribe to Our Newsletters
Feedstuffs is the news source for animal agriculture

You May Also Like