International Beef and Cattle Market Outlook August 11, 2016 Brett Stuart
Perspective • As a rancher… • Weaned calves, sold to feedyards • Focus on production efficiencies • Market was the market • Fast forward…
Perspective • Tokyo 2004 • Japanese A-5 Wagyu: US$20,000/carcass • The “exploding carcass” • Maximum calf value is highly depended on global markets
My Message Today • The North American cattle & beef markets are global • The global beef markets are complex • Recent commodity deflation was a global phenomenon • But, market “gravity” is UP • Short term outlook…. • Long term outlook is very good
N. America & Global Beef Markets • U.S., Canada, and Mexico are among each other’s largest beef and cattle trading partners • And account for 90%+ of the world’s grain-fed beef • There is little differentiation in U.S./Canadian beef overseas – Globally, grain-fed beef is it’s own brand – With large/rising demand
Source: GTIS, Agritrends
Global Meat is Diverse & Complex Global meat trade is a complicated web of politics, culture, and economics ( in that order! ) – Perishability – Bio-safety – Fragmented markets – Politically sensitive – Culturally diverse Seoul, Korea – Riots against U.S. beef, June 2008 60 million peasant farmers raise 40% of China’s pigs (half of the worlds pigs in China) 85% of U.S. chicken “paws” are eaten in China (for higher prices than leg quarters)
Source: China, Hong Kong Customs
Source: China, Hong Kong Customs, India* data includes Indian exports to Vietnam
Macro Factors FX Rates Global Economy Commodity Deflation
Source: FRED, U.S. Federal Reserve Bank
Global Economy Wobbly… • IMF has reduced 2016 forecasts, again • Negative interest rates?? • Big economy difficulties – EU: Debt crises remain for Italy, Portugal, others – Japan: edge of recession, 10-year GDP avg +0.6% – China economy slowing • Developing economy difficulties: – Brazil recession deepens – 3 rd world debt crisis, U.S. dollar pressure • Global economic growth fuels meat demand!
Source: UN/FAO
Global Food Demand • +78 million people per year (global growth) • Global middle class to rise from 2 billion to 4.9 billion by 2030 – Asia driving global food demand – But also, less-developed nations globally – New opportunities for further- processed and consumer-ready food products
Source: UN/FAO
Global Beef Trends Supplies and Prices Canada Beef Exports
Source: USDA/FAS, UN/FAO
Source: USDA/FAS, AgriTrends
U.S. expansion underway, Aussie expansion 2 years behind Source: USDA/FAS, UN/FAO
Source: UN/FAO, Agriculture Outlook to 2025
Source: USDA/FAS
Source: GTIS, AgriTrends
Source: GTIS, AgriTrends
Outlook Items U.S. / Aussie Price Spread TPP The PORK Dilemma
Source: GTIS, AgriTrends
TPP Is ESSENTIAL to US/CAN Beef! Source: AgriTrends
TPP Is ESSENTIAL to US/CAN Beef! Source: AgriTrends
The Pork Dilemma 1. Rising U.S. production Soft expansion occurring – – New plants are seeking/encouraging more production 2. Chinese demand will stall – Chinese expansion will occur But may be slowed by gov’t reg • Where will the EU, U.S., and Canadian pork go?
Source: China Customs
Source: Canada Customs, pork only, no variety meats
Source: USDA/FAS, WASDE
In Summary • Global commodity deflation likely near a bottom (but may stay here for a while) • Global pork & poultry supplies are heavy – But GLOBAL beef supplies are more stable • Record Aussie beef/cattle , cheaper U.S. and Canadian beef is winning in Asia • The future looks bright – Rising population and incomes – Rising demand for grain-fed beef globally
The Future Looks GOOD Source: GTIS, AgriTrends
35 Denver, Colorado www.globalagritrends.com Thank You Brett Stuart bstuart@globalagritrends.com 303-803-8716
Oh, and one other thing…
Enemies at home, and abroad… “We think it’s better to price meats earlier in the chain, it’s easier,” - Dr. Maarten Hajer
Global Livestock Industries Must Unite Around a Consistent Message “It is socially irresponsible to legislate yield- reducing practices” “Nearly a billion of our common population is food insecure; now is NOT the time to legislate costs and regulations that reduce supplies”
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