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USDA expects growth in beef and veal sector this year

Staff writer |
The latest forecast from the United States Department of Agriculture (USDA) indicates that global beef and veal production is set to increase a modest one percent this year to 59 million tonnes.

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Continued herd expansion will drive production up for the major players, particularly the US, India and Brazil.

The USDA forecasts that the U.S. will remain the leading beef and veal producer globally, with volumes increasing by five percent on the year earlier to reach 11.3 million tonnes. This will be the first time since 2010 in which U.S. production has risen year on year.

Improved pasture conditions and lower feed costs have contributed to a favourable position for farmers in more recent times and cattle numbers have recovered. Exports from the U.S. are also forecast to be higher next year, possibly up by over eight percent to 1.1 million tonnes as growing domestic supplies put downward pressure on prices.

Australian production this year is now forecast to be back a notable 14 percent on 2015. The significant increase in the number of females slaughtered last year is a concern for the Australian cattle industry.

Considering this followed similar developments in 2014, and that female slaughter has now been higher year on year for three years, it is inevitable that this will ultimately lead to fewer calves and lower beef production into 2017 as well.

Meat and Livestock Australia (MLA) predicts that the number of cattle coming forward for slaughter this year and next will fall to levels not seen in more than twenty years.

The national herd is estimated to fall to 26.2 million head by June this year before declining slightly again in 2017, to 25.9 million head. If this occurs, it will represent a 3.4 million head, or 12 percent, fall since 2013 and will become the lowest national herd since 1993.

By the end of the year, annual cattle slaughter is estimated to be 7.6 million head, down 16 percent on the year, one of the largest drops ever recorded.

The subsequent drop off in export volumes could well allow the U.S. to regain a valuable market share in the Asian market, which has dropped off in recent years, offsetting stagnant shipments to Canada and Mexico.

USDA forecasts that Brazilian beef and veal production will increase by two percent in 2016, with volumes totalling 9.6 million tonnes. The issue of low oil prices has been hampering demand in Brazil’s main export markets, with developments in Russia delivering the most severe blow to the trade.

However, the reopening of the Chinese market has offset this, despite concerns over the economy, and created more opportunities for Brazilian beef. It is worth pointing out that 80 percent of Brazilian beef is consumed within the country.

As such, any further deterioration in the domestic economy this year could give rise to processors having to increasingly look to export markets to fill the void. Consequently, spurred by the continued depreciation of the Real, USDA forecast that exports will increase around nine percent this year.

USDA forecasts that India will hold its position as the largest exporter, despite only being the fifth largest producer of bovine meat. For this year, forecasts indicate that production levels will increase five percent on 2015 to 4.3 million tonnes.

Foreign trade is a significant part of India’s bovine sector, shipments accounting for almost half of the countries domestic production.

A rise in demand in Southeast Asia, the Middle East and North Africa will result in exports from India increasing by a similar level. Despite this increase, with India’s exports mostly made up of product from its buffalo herd – carabeef – which is of lower eating quality and at a lower price, producers in countries such as the U.S. or Australia are not in direct competition.

However, India’s presence in emerging markets could pose a threat to the currently more established meat industries, with the expectation of future demand growth taking place in these markets as population grows and consumers become more affluent.

In a notable development this year China is expected to become the second largest beef importer after the United States due to steady growth in consumption and new market access for Brazil and Argentina.

However, despite higher demand from Asia, global shipments to the Middle East and North Africa could well remain constrained as low oil prices continue to pressure economic growth.

Overall, the outlook for the global beef and veal sector looks moderately positive for 2016, with both production and exports recording an increase.

However, as the U.S. cattle cycle enters its rebuilding phase and if the economic difficulties in Russia, South America and the MENA region persist, there could be an increase in product on the global market which may drive a more competitive environment.


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