Rabo Research
Cost Increases to Challenge Global Beef Demand
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ccording to the latest beef report released by Rabobank, global beef markets remain tight. Ongoing strong demand and more limited supplies have kept global beef prices high, but cost pressures are flowing into the supply chain. Over the past two years, retail beef price movements have been phenomenal, driven largely by strong consumer demand and some supply shocks. In Q4 2021, beef retail prices in the US were 23 percent higher than the five-year average and in China they were 24 percent above the fiveyear average. “In many cases, this increase in prices was caused by demand pull. With supply unable to keep up, the increase in demand has created an imbalance in the market and as a result beef prices have lifted,” explains Angus Gidley-Baird, Senior Analyst – Animal Protein at Rabobank.
Supply chain costs continue to rise, and will test consumers’ willingness to pay Rising inflationary pressures continue to impact the beef supply chain. Among the cost increases, labor costs (and availability), freight, and energy are some of the largest, along with feed. According to Gidley-Baird, a number of the cost increases – those associated with labor and sustainability, for example – will be permanent and will need to be accommodated within the supply chain. Others – such as freight, energy, and feed costs – are more cyclical and over time are expected to decline, allowing some easing of these costs through 2022. In many cases, the rise in retail beef prices have seen some of the largest increases in history. Beef prices continued to increase through 2021, while many of the other proteins remained stable or contracted. “Further increases in beef prices run the risk of consumers substituting to other proteins or reducing their overall consumption. And we are starting to see signs that they might be reaching their limit,”
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MAR CH 2022
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