international beef and cattle market outlook · n. america & global beef markets • u.s.,...

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 – 3rd 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

Source: USDA/FAS, UN/FAO

U.S. expansion underway, Aussie

expansion 2 years behind

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

Source: AgriTrends

TPP Is ESSENTIAL to US/CAN Beef!

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

Source: GTIS, AgriTrends

The Future Looks GOOD

Denver, Colorado

35

Thank You

Brett Stuart bstuart@globalagritrends.com

303-803-8716

www.globalagritrends.com

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”