The Rabobank global beef index ticked up in the first quarter of 2016 after declining for much of 2015. However, it shows signs of dropping again as softening prices in the U.S. and Canada battle strengthening prices in Australia and Brazil, according to the newly released "Global Beef Quarterly Q2 2016" report from Rabobank.
“Volatility is a key theme across most markets at the moment,” said Angus Gidley-Baird, senior animal protein analyst at Rabobank. “A range of factors are creating a degree of uncertainty, including the economy and exchange rates influencing Brazil, seasonal conditions impacting Australia, the economy impacting China and market volatility impacting the U.S.”
Brazil: Continuing to increase exports
The low value of Brazil's real, high domestic prices and the slow economic conditions will continue to support increased Brazilian beef exports. Exports to China, which reopened in June 2015, totalled more than 70,000 metric tons from January to May, while exports to Saudi Arabia, another new market, were more than 11,000 mt in the first five months of 2016.
China: Economy affecting consumption
China’s slowing economy is affecting general beef consumption, but higher- and middle-income earners are supporting ongoing imports as they continue to seek quality beef products. Beef prices will remain stable in the coming quarter as supply and demand are likely to be balanced.
Australia: Cattle supplies remaining tight
Australian cattle supplies remain tight and prices strong. Australian cattle prices are expected to remain strong through the third quarter, given ongoing tight cattle supplies. Buoyed by recent rains, cattle prices have risen to record levels again in June.
U.S.: Market disrupted by volatility
U.S. market volatility continues to be a market disrupter. The combination of marked week-to-week price volatility and equal volatility in the futures market has made marketing decisions difficult to impossible.
Europe: Calm in a sea of volatility
Europe is the most stable beef production region right now, with prices strengthening slightly, supported by steady exports, in particular to Turkey, despite ample availability of beef and low prices of competitive proteins.