Beef Industry: Cost Pressure, Rising Cattle Prices & Argentine Restrictions Impact Global Market

Source: Rabobank

The latest Rabobank beef report anticipates upward cost pressures for feed budgets, as weather and supply constraints are set to keep key feed grain prices high. Cattle prices in leading beef-exporting countries continued to rise or remained stable through Q2 2021. Argentina and Canada were the notable exceptions, with a rather dramatic contraction in cattle prices, while Brazilian cattle prices took a break from their upward trend.

Argentina’s restrictions have a global impact on beef trade

In June, the Argentine government implemented a system to restrict beef exports and raise the domestic beef supply. This measure came after a 30-day suspension of beef shipments in May. New quotas now limit Argentine beef exports to 50 percent of the average monthly volume exported from July to December 2020. “As Argentina was the fifth-largest beef exporter in 2020 and the second-largest supplier to China, this cut in export volumes has the potential to significantly impact global beef trade,” explains Angus Gidley-Baird, Senior Analyst – Animal Protein at Rabobank.

The first deadline for review is at the end of August, with the possibility of an extension until December. Rabobank understands that the new export system is unlikely to end in August, although it is possible that some aspects of the restrictions could be eased, particularly exports to China and Israel – the biggest export markets.

Following the discussions between the production sector and the government – where producers demanded to allow kosher meat exports to Israel and shipments to China to resume from September

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onward – there was a new announcement. On August 16, the Argentine government said they would allow an additional quota of 3,500 metric tons per month to Israel.

“There are several possible scenarios when projecting Argentine beef exports. But what we believe is most likely to happen is that there will be a 50 percent reduction in export volumes, according to the respective month of the previous year, to all destinations, with the exception of sales to China – resumed in September – and quotas to identified countries, until December 2021. In this way, they would meet the main demands of the production sector and raise the availability of beef in the domestic market, dropping exports by only 9.5 percent, compared to 2020,” says Gidley-Baird.

Brazil and Uruguay to benefit, Argentina’s production to suffer

Limited exports from Argentina – mainly to China – are expected to favor neighboring markets such as Brazil and Uruguay. Brazilian beef exports to China improved significantly in June and July. Brazilian exports in June (82,000 metric tons) increased 22 percent compared to May, and in July they saw another increase of 11 percent, reaching 91,000 metric tons, the highest volume this year.

According to INAC, in 1H 2021, beef exports from Uruguay to Argentina reached around 1,400 metric tons, the highest level in the last ten years. Shipments from Uruguay to China also increased 45 percent, reaching around 146,000 metric tons, and volumes to Israel increased 83.6 percent, to 8,200 metric tons.

Although Argentina’s government was expected to publish an incentive plan for the production sector – to prevent short- and medium-term reductions in the herd and production – Rabobank believes, based on the analysis of previous situations, that production could fall by four to five percent this year. ▫

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