Beef Quarterly Q2 2020: Beef During and Beyond Covid-19

In this quarterly, we provide an update on how the global spread of Covid-19 has caused major disruptions to beef supply chains and distribution channels and also comment on what beef demand may look like in a slower economy post Covid-19.

Report summary

“Covid-19 and the associated measures to contain it have created turmoil in the global beef market. While some countries, such as China, Australia, the US, and more recently Europe, start winding back some of the restrictions, other countries, such as those in South America, are just starting to feel the impacts,” according to senior animal protein analyst Angus Gidley-Baird. “The containment of the virus, chances of a second wave of infections, consumer reactions, and economic consequences are still uncertain.”

In other developments…

Plant slowdown in the US

Following the slowdown or closure of a number of beef processing plants in late April, US cattle slaughter dropped to almost 50% below 2019 levels. This has placed immense pressure on beef supplies and fed cattle numbers, with prices adjusting accordingly. Slaughter levels have since started to return to normal, but the large volume of cattle will take a number of months to work through.

Australian plants’ export licenses suspended

China suspended export licenses of four large beef processing plants on May 12 on technical grounds. These four plants represent a large proportion of Australia’s beef cattle slaughter and are believed to contribute a substantial volume of Australia’s exports to China. A similar situation occurred in 2017, and in that case, it took three months for the matter to be resolved.

Indian carabeef slaughter disruptions

Supply chain disruptions (logistics and labor issues) during lockdown are impacting carabeef operations in India. Buffalo supply to slaughter houses has been significantly impacted, as animal markets are either not operating or operating in a limited way. Furthermore, there are delays at Indian ports for movement of product, as operations at ports are under pressure. We expect carabeef exports for March to May to be significantly lower.

Rabobank Seven-Nation Cattle Price Index

The impacts of Covid-19 and weaker currencies have seen cattle prices (in USD terms) drop over the last three months (to April) to take the index to its lowest point since March 2010. All countries, apart from Australia, have seen significant reductions in cattle prices.