The Covid-19 pandemic has hit a booming global cattle market. The coronavirus has shaken the trends, made cattle market prices drop, and the outlook for 2020 uncertain.
Last year, the world’s biggest suppliers to the global market (North and South America and Oceania) were rubbing their hands excited about their exports of beef on the rise, driven by strong demand from Asia, mainly China.
Certainly, beef is still marginal in food rations, but it is gradually gaining in importance, particularly in catering for schools, hospitals, workplaces, and retirement homes. However, the European Union appears to be more marginal each year in this great game of world beef trade, even though its exports have increased last year. Its natural market in the countries around the Mediterranean has been penalized by the economic crisis and geopolitical tensions.
But while the export has increased, especially in Latin America and Australia, the demand from some countries has decreased. This is the case in Argentina and Brazil, where a deep economic crisis has reduced the domestic demand. In Australia, herders had to carry out a major decapitalization due to the persistent drought
But as in many sectors, the crisis caused by Covid-19 and resulting lockdown has shaken the global beef market, already affected by low cattle market prices.
The impact on the world trade is still difficult to assess, but between logistical difficulties, extended closure of restaurants, and, above all, an economic crisis that deepens from one week to another, everything tends towards a flow decrease.
Meat Market Observatory presents a graph of the World Beef Prices evolution over the last 5 years until September 2020. Judging from the graph, it looks like some cattle market prices are on an ascending trend in some countries but the forecast for the near future is uncertain.
According to Trading Economics, since January 2020, Feeder Cattle market prices have decreased by 12.70 USD/Lbs or 8.78% worldwide. The highest historical peak was reached in October 2014, with 245.20 USD/Lbs. However, by the end of October 2020, Feeder Cattle are expected to be traded at 134.26 USD/Lbs. The forecast is gloomy for October 2021, the feeder cattle market price is expected to decrease to 121.34 USD/Lbs.
UNCERTAIN OUTLOOK FOR 2020
The European production is likely to decline further in 2020, by 1 to 2%, according to the estimates. The problems with carcass balance (better profitability of dairy cows, the consequence of the increase in demand for minced meat, but the decrease in demand for sirloin) and the loss of value on hides and offal have caused violent cattle market price drops. If the situation should improve with the end of lockdown and the resumption of out-of-home catering, the purchasing power of European consumers will decrease because of the economic crisis following the lockdown.
In Russia, the livestock will continue to decline in 2020. But the coronavirus negatively impacting the country’s domestic demand, the decline in beef imports could be bigger. Their decline was also initiated by the 2014 embargo. At the end of 2019, the Russian authorities threatened to ban the import of beef from Argentina and Paraguay following the discovery of traces of ractopamine. For the same reason, Brazil was subject to an embargo on its exports of beef and pork by Russia at the end of 2017, leaving more room for competition. The embargo was lifted a year later.
- Mediterranean Countries
Imports dropped last year in the Mediterranean countries, as a result of the economic difficulties some of them encountered. Stuck in an economic crisis, Turkey has reduced its purchases to half. It only accounted for 40% of the area’s imports in 2019 against 59% in 2018. Domestic demand is at half-mast in the country. This is also the case in Lebanon. In contrast, imports of live cattle and meat have increased in Maghreb countries. But the European Union’s beef market shares continue to shrink in this zone.
A major problem for 2020: the economy of certain Mediterranean countries depends heavily on oil. The collapse of prices caused by the pandemic risks makes this market very uncertain and pulls the imports down. This is the case in Algeria, Egypt, and Turkey. The decrease in income from tourism also risks worsening the already fragile economic situation in some countries.
- South America
The situation is a little less gloomy in South America. In 2019, the production of the main exporters increased as a result of the growth of Brazilian production and the continued decapitalization of the Argentinian livestock facing an almost continuous economic crisis since 2017. Confronted with the generally unfavorable economic situation in the South American countries and vigorous Chinese demand, the operators preferred to turn to exports rather than to the domestic market. Exports even bloomed in 2019.
If the pandemic threatens to worsen the current social crisis, Brazil is far from hampering exports: shipments of beef to China and Hong-Kong have once again taken off, and new export markets have emerged (opening of the US market to imported meat in 2020). On the other hand, the increase in Argentinian exports could weaken, just like production, because domestic consumption is strongly impacted by Covid-19, and the country’s economy is already at its lowest.
- North America
In North America, meat shipments maintained their dynamics in 2019. While production followed an upward trend in the United States, it was brutally slowed by the outbreaks of contamination in slaughterhouses and processing plants. The explosion of unemployment in the United States has also reduced meat consumption: with the crisis, production and export forecasts have been revised downwards, but are still improving.
As for Canada, the pandemic has plunged the country into recession, with erratic buying by consumers during the lockdown. After the discovery of Covid-19 clusters in the two largest slaughterhouses in the country, the slaughters collapsed. Thus the delays in the slaughter are causing an unprecedented increase in slaughter weights.
After a record year for the Mexican production and exports, the trend is expected to continue in 2020, at a slower pace. The impact of the pandemic is difficult to measure but could slow down domestic consumption and, therefore, stimulate exports.
- South and East Asia
Last year, East and South Asia were drivers for world beef imports (second place). With African swine fever and the rise in the price of pork in China (the world’s largest importer), many consumers have turned to other sources of animal protein, and especially beef, despite its high price. In 2020, the consumption, as well as imports, will continue to grow in China, despite the health crisis.
Strong Chinese demand had also boosted shipments from Oceania, especially New Zealand exports. But in early 2020, the pandemic slowed down shipments to China and led to logistical delays. Beef production is also expected to decline in the country in 2020 because of the drought that reduces grassland yields and carcass weights. On the other hand, the favorable weather conditions in Australia should allow the livestock to rebuild this year. However, production is expected to decline, with exports falling and focusing on the most profitable markets, especially China.
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