Rabobank Beef Quarterly Q4 2016: Supply-Driven Market Keeping Prices Low

The global beef market heads into 2017 dominated by supply growth and soft global prices, according to the Rabobank Global Beef Quarterly Q4 2016. With US and Brazilian beef production forecast to increase by a further 3 percent in 2017, supply will continue to dominate. The capacity of the market to balance this growth in supply will rely heavily on the ability to stimulate demand, particularly in Asian nations.

According to Angus Gidley-Baird, Senior Analyst Animal Proteins: “Four key factors will influence the direction of the beef market in 2017: South American growth, space in the US market, China’s demand and South-East Asian demand. More recently, three events have also had an impact.”

US election result drives currencies. If the movements in the US dollar and Mexican peso following the US election are any indication of the future, growing US production will struggle to find relief in increased exports. At the same time, the growing Mexican beef industry could find new opportunities in the global market.

Future of the Trans-Pacific Partnership unlikely. Following the US elections, indications are that there will be no further progress on the implementation of the Trans-Pacific Partnership. While there are missed opportunities for beef-trading nations that were in the TPP, it may create opportunities for China to promote its own regional trade agenda.

Dry conditions in Inner Mongolia and lower dairy prices have caused increased cattle slaughter in China. While pushing domestic cattle prices down, imports into China have remained competitive thanks to increased volumes from Brazil. The current higher levels of production are expected to be followed by lower production in 2017, further supporting demand for imports.

Cattle prices in most countries either fell or remained steady over the last three months, resulting in the Rabobank 7-Nation Index tracking down for the period August to November.

For more information about this publication please contact its author:
Angus Gidley-Baird: angus.gidley-baird@rabobank.com, Tel: +61 2 8115 4058

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