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No growth expected in global beef consumption in year ahead - Industry report

With limited or negative real wages growth expected in 2024, coupled with the higher cost environment, Rabobank expects global beef consumption will at best remain steady and possibly decline through 2024, with some notable regional variations.

In its recently-released Q1 Global Beef Quarterly report, the agribusiness banking specialist says beef is generally considered a premium protein with a high price point – even though a large part of the carcass is sold as ground beef, a lower price point commodity – and sales are often expected to suffer when economic conditions put pressures on consumer spending.

The report says this situation poses important questions for those in the supply chain around margins and trade – “can prices be maintained or pushed higher to make up for the loss of consumption or do retail prices have to ease to encourage higher consumption?”.

The bank says, in a market where beef production growth is limited, such as the United States, the consumer may be willing to tolerate higher prices at the expense of some consumption, therefore maintaining demand.

“On the other hand, in a market with growing supply – such as Australia – lower prices may be needed to encourage consumption,” the report said.

Report lead author, Rabobank senior animal proteins analyst Angus Gidley-Baird said these supply and demand dynamics may swing beef trade flows towards the United States.

Mr Gidley-Baird expects Chinese import demand for beef to remain sluggish in 2024, at least in the first half. With strong import demand though in the United States, along with lower domestic supplies, beef trade is already being diverted to the US.

“Brazil’s exports to the US in January 2024 were ahead of 2023 and Australian volumes to the US were up 127 per cent year-on-year,” he said.

“So if China’s recovery is better than expected, global beef markets could become quite tight, fuelling price rises.”

The Rabobank Global Beef Quarterly says although the prospects of increasing global beef demand may not be strong in the year ahead, the bank retains a positive outlook on the market.

“With US production declining and the country’s economic outlook being reasonable, the US is likely to lead the beef price-setting market,” Mr Gidley-Baird said. “This is likely to draw increased volumes from Australia, New Zealand and Brazil, along with trade from Canada and Mexico. But value will become the predominant theme across most markets in order to retain those consumers faced with balancing the tighter economic conditions.”

What happened to global beef consumption in 2023?

The report says beef retail prices have risen across most markets since 2019, shaped by various drivers. “Australian retail beef prices rose on restricted supplies, while US prices increased to absorb additional costs,” Mr Gidley-Baird said.

“The relationship between price and per capita consumption gives a reasonable indication of beef demand – with constant consumption despite higher prices reflecting stronger demand,” he said. “As a general statement, consumption levels for beef have been relatively flat to slight declining over the past three years.”

Mr Gidley-Baird said this was in line with academic studies, which showed consumers’ spending on beef were influenced by prices and household incomes.

“On top of beef price rises through 2021 and 2022, the impact of inflation in 2022 and 2023 added to the cost of living, putting consumer budgets under pressure and changing meat spending patterns,” he said.

“In 2023, it became more common for foodservice and retail companies to note the change in consumption patterns. Consumers are trending towards the cheaper price point options and companies are promoting value-based propositions,” he said.

Australia

Mr Gidley-Baird said the Australian cattle market is still resting in producers’ hands. “With increasing cattle inventory levels and weak consumer demand – except in the US market – Australian cattle prices remain heavily reliant on producer sentiment and marketing activity,” he said.

The Rabobank report said in Australia, large and increasing volumes of cattle in the system mean buyers have plenty of choice and, while consumer markets are weak, there is no need for processors to chase cattle. Therefore, any floor in the market is being generated by producer marketing activity.

“The dry conditions and pessimistic producer sentiment in 2023 saw cattle prices drop 40 to 50 per cent in the first 10 months of the year,” Mr Gidley-Baird said. “Since rain in November and again in January this year, producer sentiment has turned around and prices have lifted by more than 50 per cent since October and are close to where they were at the same time in 2023.”

“Indications are that seasonal conditions will remain positive for the next six months and as such we expect prices, having now recovered the drops from 2023, will level out into the middle of the year.”

With increasing production, Mr Gidley-Baird said, Australia’s exports have been growing.

“Volumes in 2023 were up 27 per cent year-on-year, with large increases to the US (up 84 per cent), China (up 30 per cent) and South Korea (up 18 per cent),” he said.

Volumes to Japan, however, dropped five per cent reflecting the high beef inventory levels and weak consumer demand in that country.

“We expect consumer markets – particularly Australia’s Asian export destinations – to remain weak for the first half of 2024 before stocks are cleared and flows start to recover,” he said.

 

Rabobank Australia & New Zealand Group is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 38 countries, servicing the needs of approximately 8.4 million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 90 branches throughout Australia and New Zealand.

Media contacts:

Denise Shaw
Head of Media Relations
Rabobank Australia & New Zealand
Phone: 02 8115 2744 or 0439 603 525
Email: denise.shaw@rabobank.com

Will Banks
Media Relations Manager
Rabobank Australia
Phone: 0418 216 103
Email: will.banks@rabobank.com