Beef Quarterly Q3 2018: All Eyes on the US Protein Complex

The US market is the focus in this Beef Quarterly, however, there are a number of other important issues that are continuing to influence global beef markets.

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North Asia increasing imports

Japan and South Korea beef imports are on the rise. In 2017, combined imports by Japan and South Korea were up 9%, and at their highest level since 2002. Along with improved economies and lower global beef prices, the availability of beef from Australia and the US is fuelling this growth. Australian exports to Japan and South Korea are up 11% for the YTD (June), while the US appears to be focusing more on South Korea, with exports up 41% while up only 6% to Japan. Japan has also granted access for Argentina to export fresh beef into the country for the first time with the first shipment, albeit small, arriving in July. This decision would be a positive indication for Brazil who is also entertaining the prospect of gaining access to Japan.

Margin pressure starting to show

At the start of 2018, Rabobank referred to growing competition and complexity in global markets, and the opportunities and pressures this could bring to margins along beef supply chains. Part way through the year we have seen corporate results reflecting this mix of challenge and opportunity. Some global beef companies have revised down their earnings expectations, due to a combination of trade disruptions and ample protein supplies, while others have credited beef with contributing to high earnings. On balance, we see more margin pressure looming.

African Swine Fever outbreaks

Several outbreaks of African Swine Fever (ASF) were recorded in China in recent months, which raises the possibility of China – the world’s largest consumer of pork – being caught short. While the extent and timing of any herd liquidation remain uncertain, if ASF takes hold, it is likely that China will increase imports of pork – and other meats such as beef – in 2019. An associated lift in global pork prices could also benefit beef supply chains in other regions.