The global beef sector is expected to face challenges in 2024, as consumers continue to be cautious about spending on premium cuts, according to a report by Rabobank.
According to the report, one of the main factors limiting consumers’ willingness to spend on beef is the sluggish global economic recovery, which is slower than anticipated. The report highlights that many economies, particularly those in Asia, have not recovered as quickly from the impact of the COVID-19 pandemic as initially expected. As a result, many consumers are continuing to be cautious about their spending, including their purchases of beef.
“In China, consumer preference is shifting towards value-for-money products, with reduced emphasis on premium options,” the report noted.
The report showed that Australia and South America are expected to see an increase in beef volumes in the coming year, which could help support consumer spending on beef by providing more affordable options. However, it is expected that North American beef, particularly the more expensive cuts, may see reduced volumes as consumers become more cautious about their spending.
However, the leading financial services group focused on agriculture, warns that if U.S. beef production continues to contract, it could lead to a rise in global beef prices, potentially pushing back against the consumer trend towards spending caution. This could create a squeeze in the margins of the beef supply chain, affecting producers, processors, and retailers.
According to the report, global beef production across monitored markets is expected to decline by 1 per cent in 2023 and 2024, compared to 2022. While production in the Southern Hemisphere, including Australia, is expected to increase, it has not been enough to offset the declines in production in Europe and the United States.
The report noted that the U.S. consumer demand for beef remains strong, but there is a possibility that demand could weaken in the future. In Asia, the market is facing challenges due to weak demand and high inventory levels. Overall, the report found that the global beef market is likely to remain volatile in the coming years
The report also noted that while the conflict in the Middle East is not expected to directly impact the global beef trade, there could be indirect effects such as higher fuel and energy costs. The Middle East is an important import market for poultry and sheepmeat, and any disruptions to trade in those products could potentially spill over to beef. However, the report stated that the overall impact of the conflict on the global beef trade is likely to be limited.
The report also discussed the potential impact of climate change on the beef industry, noting that extreme weather events can lead to disruptions in the supply chain and increased costs for producers.
Rabobank’s senior animal proteins analyst Angus Gidley-Baird suggested that the Australian beef sector may have reached the bottom of the market and is expected to stabilize. While the sector has faced challenges such as higher cattle volumes and processing constraints, Gidley-Baird believes that increased certainty about stock numbers will lead to increased slaughter numbers in the first quarter of 2024.
However, Gidley-Baird cautioned that these conditions could change if there are any major disruptions to global beef trade. He also noted that market volatility is expected to continue into the medium term as the sector continues to recover from the disruptions caused.