OMAHA (DTN) -- While the U.S. beef industry remains the global standard for quality and supply stability, will its reputation for producing a safe and nutritious product be enough to compete with global markets?
The new report on global beef production, recently released by Rabobank, stresses that global beef production is increasingly competitive and complex. Beef producers and processors across the globe are keeping a close watch to see whether consumption will be keeping up with growth in production. Another challenge for the beef industry is competition from the pork and poultry industries.
Rabobank's report points out that the U.S. beef industry faces an increasingly competitive global beef market and suggests the U.S. must engage in discussions to develop a competitive strategy. Such discussions should include three steps that Rabobank predicts will create trade opportunities and help the U.S. secure a future competitive strategy:
1. Increasing exports and embracing trade opportunities by encouraging the successful conclusion of the Trans-Pacific Partnership, which will help the U.S. become more competition in supplying the world's growing protein demand.
2. Adapting to changing markets and changing production to meet evolving consumer preferences both domestically and internationally, such as requests for beef produced under conventional production practices, beef with specific attributes, beef produced without implants and with ractopamine, a feed additive used to promote growth.
3. Instituting a voluntary, industry-driven traceability program that would build into an industry-wide program. Rabobank said such a program would boost the trust of customers and shorten how long animals would need to be isolated in the event of an animal health issue.
U.S. beef production will likely increase between 3% and 4% in 2016, with a larger rate increase in 2017, Rabobank stated. Competition for U.S. domestic retail market shares will be intense in coming years due to increases in pork and broiler production in 2015. Rabobank also projected that a decreased quantity of beef coming into the U.S. from Australia and New Zealand will likely be offset by increased shipments from South America.
GLOBAL RESPONSE TO SIGNS OF ESSENTIAL PRODUCTION INCREASES
Many major beef-producing export countries have experienced challenging weather conditions in recent years that resulted in heavy liquidation of cattle. The global market has responded to these strong price signals by increasing production. Such signals, particularly strong in the U.S. market, gave cattle producers worldwide an inflated signal to increase production. An example is expectations of an increase in Chinese beef demand seemed to be an opportunity for such expansion, the report said.
Rabobank predicts that in the next three years, global beef production will likely experience a great deal of growth in both North and South America in response to such price signals, as well as new trade agreements, low feed costs and increased beef production and domestic policy reforms in some markets. However, the report questions whether the increased production will cause a supply glut, especially in countries like Australia and New Zealand where production is expected to decrease in the next few years.
RABOBANK BEEF PRODUCTION PREDICTIONS
Rabobank listed some predictions for some of the major beef-producing countries:
United States: Rabobank expects continuation of the herd expansion in the past two years to continue to 2020, but warns that heifer retention will likely slow down from levels of the past two years. Competition for retail protein has been challenging, especially as recovery from avian influenza and PEDv has caused growth in pork and broiler industries. However, feed grain supplies expanded cattle feeders to produce all-time record carcass weights. The report also said that the strength of the U.S. dollar could limit export sales in the near future.
Mexico: Mexico has had impressive growth in cattle feeding and fed beef production, and Rabobank predicts that growth to continue. While drought conditions in 2011 and 2012 led to aggressive herd liquidation and exports, Mexico has been able to sustain annual exports of cattle to the U.S. while retaining enough cattle for domestic feeding and herd rebuilding.
Canada: Canada experienced a long decline in its domestic herd due to the BSE event in 1993 and effects from county-of-origin labeling. Rabobank said the cow herd liquidation appears to have stopped in the last six months of 2015 and predicts that Canada may finally be in a position to engage in serious herd rebuilding.
Brazil: The report predicts that Brazil will have an increase of 1 million tons of beef in world export markets by 2023, which will give it a 25% share in the international beef market. Still, its structure and beef value chain is less developed that other major beef exporters, which limits it production potential and increases costs and risks along the chain.
Argentina: After decreased production and exports in recent years, Argentina's new president, Mauricio Macri, is touting a pro-business agenda that may boost the country's beef industry. However, Rabobank predicts it will be two to three years before those changes will have any effect on global markets. The report also predicts that the removal of Argentina's export tax may affect the country's domestic beef prices in 2016 and reduce local consumption.
Uruguay: Rabobank expects Uruguay's total cattle numbers to decline slightly in 2016 because of excess cow-calf production, but will continue to function as a sold beef producer, with an expected increase in grain-fed cattle numbers.
Australia and New Zealand: Both countries face significant reductions in beef production, due to severe herd liquidation because of drought in 2013. That reduction is expected to continue into 2016 before settling at around 25.7 million head in 2017, the lowest level since 1994.
India: India does not produce prime beef, but rather "carabeef" from its buffalo dairy production. Rabobank states there will be a sizeable market for the product as incomes rise in emerging economies and consumers want more protein in their diets.