Argentina and Brazil beef production will rise this year

Reuters — Smaller U.S. beef and cattle supplies in 2013 should push prices for both commodities to record highs then, with slaughter-ready cattle likely to trade at $140 to $145 per cwt next spring, Rabobank said in its December quarterly beef report.

A drought and record-high feed grain prices caused U.S. cattle producers to shrink herds in 2012, resulting in less beef as well as record-high beef and cattle prices.”To date, consumer demand for beef has held remarkably well. It will be critical to see if consumers stay committed to beef with additional record prices expected in 2013,” the report said.

U.S. slaughter-ready cattle traded a record $130 per cwt in March of this year.

First-quarter U.S. beef production next year was forecast at 5.84 billion lbs., down seven per cent from a year earlier and second-quarter production was estimated at 6.15 billion lbs., down five per cent, it said.

In addition to fewer cattle, Rabobank said high feed costs will have producers selling cattle at lighter weights, which will produce less beef per animal.

Global beef production in 2013 should be similar to 2012, with increases in Argentina, Australia and Brazil offsetting declines in the United States and Europe.

Australia’s beef production is seen up two per cent next year, Argentina’s up four per cent, and Brazil’s up three per cent.

“On the demand side of the equation, the broader picture points to another year of relatively weak consumption on the back of a still sluggish economy, as world GDP is expected to grow only slightly in 2013,” Rabobank analyst Guilherme Melo said in a statement.

Beef companies in North America and Europe may have a difficult time passing on the higher cattle costs to consumers, the report said, while South American beef exports may be tested by political and economic changes in their Middle East and North Africa markets.

Global beef producers may benefit from less poultry as high feed costs should curb that production.

“To the extent that this increases poultry prices, it may also benefit the beef industry as the gap between beef and chicken prices narrow and possibly shifts demand towards beef,” Rabobank said.