Beef Quarterly Q3 2017

Transcription

1 September 2017 Beef Quarterly Q Trade Dominates the Beef Agenda RaboResearch Food & Agribusiness far.rabobank.com Published by the Global Animal Protein Sector Team Lead author Angus Gidley-Baird For a full list of authors, see back page US dominates trade US beef exports are up 11% YOY in volume for the year to July and up 15% YOY in value terms. This highlights the ongoing availability of product for export from the US, as well as challenges in exporting from Australia and Brazil. US beef exports are up for the year to date to Japan (22% YOY), Hong Kong (33% YOY), and Canada (5% YOY). Australia has been restricted by availability of beef for export, while the weak flesh scandal in Brazil slowed exports of all proteins in 1H At the same time, the US has recorded stronger-than-expected beef imports, which are up for the year to date by 11% YOY. Japanese tariffs After reaching the trigger level, the Japanese government introduced safeguard measures and increased the tariff on imported frozen beef to 50%. This will impact all nations sending beef to Japan, apart from Australia, Mexico, and Chile, which have trade agreements. Argentina seeking US access Argentina is trying to start shipments of fresh beef to the US. In August 2017, negotiations appeared to have taken a step closer to reaching an agreement, when Argentina announced that it had opened its market to American pork products, showing that bilateral meat trade is under discussion. If Argentina is successful in gaining entry to the US fresh beef market, it will have access to a 20,000-tonne beef quota. Brazil exports recovering After having declined by more than 8% during 1H 2017, Brazilian beef exports have shown a strong recovery during Q In August 2017, they reached their highest level in four years. Consequently, beef exports reversed the negative results and have already increased slightly for the first eight months of Moreover, Brazilian beef exports are likely to sustain volumes above 2016 levels during Q Uruguay exports live cattle to China In August, Uruguay sent a load of breeding cattle to China. A total of 6,710 female cattle made the 38-day journey. While not the normal practice as frozen semen is usually imported for genetics improvement the shipment suggests China is eager to explore ways in which to increase beef supply in the domestic market. Figure 1: Rabobank Seven-Nation Beef Index, Jan 2010-Jul Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: Rabobank /9 RaboResearch Beef Quarterly Q September 2017

2 Feature: Australia on the road to recovery After almost two years of decline, Australian monthly beef production volumes changed course, increasing by 11% and 20% YOY, respectively, for the months of June and July (see Figure 2). Is this the start of the rebuild, with increases in export volumes to follow, and cattle and beef prices to ease, rebuilding Australia s presence and competitiveness in global markets? While the decline in production has stopped, Australia s ability to rapidly increase production as has been seen in the US will be limited, and a more gradual increase in global markets is expected. Volumes lifting or returning to normal The year-on-year increase in production for the months of June and July has now brought year-to-date production back in line with 2016 levels. Year-to-date production as of July was 2% down on 2016 volumes and sets the 2017 year up to be in line with 2016, at about 2.1m tonnes. While a big drop from the volumes produced in 2013, 2014, and 2015 (2.35m tonnes, 2.58m tonnes, and 2.54m tonnes, respectively), this is closer to the longer-term average annual production from 2008 to 2012 averaged 2.13m tonnes. So, while still a drop, production levels are returning to more normal levels. Exports follow a similar story. Up until June, year-on-year monthly export volumes had been declining. In July and August, volumes increased 15% and 22%, respectively, making the yearto-date volumes to the month of August very similar to volumes exported in If exports reach the same level of those in 2016 while a big drop on the volumes from 2013, 2014, and 2015 they will be more in line with longer-term export volumes. The rebuild process While the halt in the liquidation process occurred in mid-2016, when large parts of south-eastern Australia received improved rainfall, the rebuild process is currently on hold. In late 2016, we saw strong buying activity by producers in the younger cattle classes, as they looked to rebuild breeding herds. However, this activity has declined in recent months, with areas across Australia again facing continuing, or drier, conditions. An indication of the rebuild process is evident in the female proportion of total cattle slaughter. In late 2016 and early 2017, female cattle accounted for between 41% and 43% of the total Figure 2: Monthly year-on-year change in production, Jan 2010-Jul % slaughter a level which is usually associated with herd rebuilding. However, this proportion has increased as the year has progressed, and in July, it was 47%, indicating less of a rebuild and more of a holding pattern. Recovery or growth? Traditionally, when Australia experiences dry conditions, producers take actions to reduce their herd. This usually means low-productivity cattle are the first to go, and it exaggerates the slaughter and production numbers. Over the last 30 years, a dry period will create inflated slaughter numbers, but generally production will return to the longer-term average immediately following improved seasons or, at most, taking three years. With forecast numbers for 2017 in line with the longer-term average, this may be one of those instances where recovery (to the longer-term average) is very quick (see Figure 3). However, with the cattle herd down by 10%, there is again opportunity to grow the herd and replace culled cattle with reproductive ones. So the question becomes: How fast and by how much can Australia grow? If Australia were to rebuild the herd to 29m head and maintain its current productivity, it could potentially reach a production level 15% higher than current levels, at about 9m tonnes. However, a producer s ability to replace lost breeding cattle will be limited physically (by seasonal conditions and cattle availability) and financially (with limited cash flow or high cattle prices that encourage trading). Given the current situation, the growth scenario to these high levels is expected to be beyond five years. Where to for Australian exports? In the medium term, a more normal production and export schedule, with declining Australian cattle prices, is expected to see Australia consolidate its main export markets of Japan and South Korea, where it has faced strong competition from the US. With the US herd growing, the volume of Australian exports to the US is not expected to see large increases for a number of years. A slight rise in exports to China may be possible, with improved competitiveness of Australian product in this market. Longer-term, Australia s domestic consumption is flat, and future growth in beef production will be directed toward export markets. The current markets (Japan, the US, South Korea, and China) are all expected to remain strong. Growth of the Chinese market is, however, expected to be tempered by competition from the growing presence of the US and South American countries. South-East Asia remains a big opportunity for Australia. Figure 3: Australian beef production, f % YOY change 10% 0% -10% -20% tonnes cwt % -40% Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul f Source: MLA, Rabobank 2017 Source: MLA, Rabobank /9 RaboResearch Beef Quarterly Q September 2017

3 Regional outlooks Australia: production and exports rise On 31 August, after falling for 18 weeks, the EYCI lifted, to AUD 5.53/kg cwt (see Figure 4). The lift in prices was generally associated with younger cattle in saleyards, while over-thehooks and feeder prices tended to remain flat. Rainfall in south-eastern areas will likely have stimulated some producer demand, although the lift in prices was evident across the whole eastern seaboard. Prices are still expected to fall a little further; however, they are now entering a range that should be more acceptable for all parties in the chain. After declining for almost two years, slaughter numbers reversed their downward trend, with an increase in year-onyear comparisons in June. This continued into July, up 16%, at 633,000 head. Reflecting the increased cattle on feed and higher carcase weights 298kg in July, a 4% increase on July 2016 production levels are up 20% YOY for the month of July, at 189,064 tonnes cwt. Year-to-date production to the month of July is now only 2% down on 2016 levels. Exports are also showing year-on-year growth, with the month of August up 22% on August was also the first time in 15 months that monthly exports have exceeded the five-year average for the month. Year-to-date exports are now in line with 2016 volumes. Exports to Japan and China have performed strongly for the year to date: up 31% and 21%, respectively. Exports to the US have also improved through the months of July and August: up 26% and 51%, respectively. US 90CL import prices have been increasing throughout the year; however, in July, they dropped suddenly, which will make exports less attractive. Live cattle exports continue to be down, with year-to-date volumes down 42% and volumes to Indonesia down 37%. June quarter cattle-on-feed numbers increased again, to set a new record, at 1.09m head. Feedlot capacity is also growing, with an additional 50,000-head capacity being brought online in the last 12 months. Brazil: exports increasing The first half of 2017 was certainly an intense period for the Brazilian beef industry. In Q2, exports suffered a significant setback, following the release of details of the carne fraca ( weak flesh ) police investigation. However, following the initial wave of temporary import bans, it became clear that the investigation concerned just 0.5% of total processing-sector capacity. With considerable effort invested in providing transparent information to Brazil s importers, the negative impacts on exports began to dissipate early in Q The industry has also been disrupted by ongoing governance issues at Brazil s largest beef processing company. In July 2017, Brazilian beef export volumes increased by around 20% against July 2016 (see Figure 5). Additionally, in August 2017, beef exports were the highest since October As a result, after having declined more than 8% during 1H 2017, Brazilian beef exports have increased slightly for the first eight months of During Q4, exports are expected to sustain volumes above 2016 levels. China will continue to be an important destination for Brazilian beef exports. During an official visit to Beijing in early September, Blairo Maggi, the country s Minister of Agriculture, Livestock, and Supply, announced that China is likely to increase the number of Brazilian beef plants that have clearance to export to China. Currently, 16 beef plants have access to China, with an additional 89 seeking approval. After two years in recession, the Brazilian GDP is expected to increase by 0.6% in Because of this improved local scenario, coupled with strong exports, live cattle prices have rebounded, and in early September 2017, they were at around BRL 145/15 kg, the same level as in February 2017, the pre-crisis reference. Regarding supply, Brazilian beef production is expected to increase only slightly during However, it is likely to gain strength in 2018, when it should increase by between 3% and 4%. Figure 4: Australian cattle prices (Eastern Young Cattle Indicator), Jan 2015-Aug 2017 Figure 5: Brazilian beef exports, Jan 2014-Aug 2017 AUD/kg thousand tonnes Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Five-year average 0 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Source: MLA, Rabobank 2017 Source: Brazilian Ministry of Industry, Foreign Trade, and Services; Rabobank /9 RaboResearch Beef Quarterly Q September 2017

4 Canada: minimal growth in herd size Shipments of Canadian feeder cattle to the US are down 37% from a year ago. At first glance, one could automatically assume that there are substantially more cattle on feed in Canada than a year ago. That simply is not the case. Cattle on feed in Canada as of 1 August stood at 671,300 head, up only 2% over a year ago. Monthly placements into Canadian feed yards have been above year-ago levels through the first half of the year, but only marginally. Marketings during the first half of the year have been good, especially in May, June, and July. As a result, there appears to be no major imbalance of cattle inventories as a result of the substantially reduced exports of feeder cattle. While slaughter rates have been high, exports of beef to the US through June are only up 5.8% over a year ago. Overall prices of feeders and fed cattle in Canada for the year to date have been better than what the cattle would bring in the US (see Figure 6). The reduced feeder-cattle shipments have been the result of large feed-grain supplies that have made feed costs comparable to, or lower than, those in the US. Also driving the reduced shipments of cattle has been the exchange rate, as the US dollar has declined, and the Canadian dollar has strengthened. While the Canadian advantage in feed cost appears to be narrowing, the imbalance in the exchange rates will likely again lead to altered shipments of calves and feeder cattle into Q4. The 1 July Canadian cattle-inventory report posted a total midyear cattle inventory of 12.95m head, up fractionally over a year earlier. Beef cows, at 3,796,700 head, were up 0.5%, while dairy cows, at 945,000 head, were up 1.6%. Beef replacement heifers, at 673,200 head, were up 0.6%, and dairy heifers, at 453,300 head, were up 1.5%. Steers, at 1,638,300 head, were up 0.9%. Beef heifers, at 1,002,100 head, were down 0.5%, and calves, at 4,213,500 head, were up 0.2%. Aside from a modest increase in both dairy cows and replacement heifers, there was virtually no change in the Canadian cattle inventory. That has been the story for several years, and given the lack of incentive to export feeder cattle and calves to the US, no significant changes in cattle inventory are expected anytime soon. China: stable, but seasonal demand to kick in China s beef market has been relatively stable in the past quarter. Beef retail prices are very similar to last year, a big contrast with pork, poultry, and egg prices, which have fluctuated greatly in 2017, due to a range of factors (see Figure 7). In the coming months, beef prices are likely to be further supported by seasonal demand, as festivals and winter months are approaching. Local beef-cattle production is moving quietly towards industrialisation, albeit at a slow pace. This is mainly taking place in regions with abundant resources of grassland or crop residue. Cattle farming is highly encouraged in such regions as part of the ecosystem, by means of receiving a certain amount of financial aid or technical support from the government to increase farming scale or improve genetics. Large processors are also encouraged to invest or off-take feeder cattle from local producers. While the overall industrialisation in the beefcattle sector is not yet comparable with other livestock farming, some progress has been made in specific regions, such as the north-east, driven by local government. Despite regional progress, national production is believed to be continuously slower than demand. In recent years, the Chinese government has allowed more countries to supply China, suggesting a relatively relaxed attitude towards beef imports. With ongoing growth in imports over the past years, some beef processors have turned to imports due to lower costs. This places further pressure on domestic production, which will face more challenges in the coming years. In the first seven months of 2017, China s official beef imports increased by 13% YOY, reaching 388,000 tonnes. Due to political turbulence, Brazil dropped to second place and was replaced by Uruguay, which increased exports strongly, by 32%, and accounted for 29% of China s total import YTD. US beef shipments remain low, mainly due to the limited supply in the US that meets China s requirements. The US beef-supply chain needs more time to adjust production systems in order to meet the Chinese government s requirements. Figure 6: Alberta fed steer prices, Jan 2015-Sep 2017 Figure 7: Chinese retail meat prices, Jan 2015-Aug CAD/cwt RMB/kg RMB/kg (beef) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 16 Jan 2015 Mar 2015 May 2015 Jul 2015 Sep 2015 Nov 2015 Jan 2016 Mar 2016 May 2016 Jul 2016 Sep 2016 Nov 2016 Jan 2017 Mar 2017 May 2017 Jul Five-year average Pork retail price Chicken retail price Beef retail price (RHS) Source: USDA, Rabobank 2017 Source: Chinese Ministry of Agriculture, CAAA, Rabobank /9 RaboResearch Beef Quarterly Q September 2017

5 EU: production starting to slow The multi-year phase of expanding beef production in Europe is slowing down. Production started increasing in 2014 and now appears to be close to, if not just beyond, the peak of the cycle, with production in 1H 2017 recording a slight decrease (down 0.1% YOY). A reduction in the number of cows being slaughtered is clear across most member states largely occurring as a result of dairy-industry restructuring even though other cattle classes have shown marginal increases. Ireland, the Netherlands, and Poland are the main exceptions to the overall trend. All three of these countries are significant beef producers, and all three continue to show production growth in 2017, of between 3% and 14%. Exports have continued their momentum from Q1 2017, recording a 16% increase for 1H Live-animal exports increased in Q2, particularly to Turkey, where minimal exports occurred in the first months of this year. Beef-product exports have increased markedly to Hong Kong and the Philippines. At the same time, beef imports have been down considerably in 1H 2017, by about 15% YOY. A significant decrease in imports from Brazil has been clear, down almost 30% YOY, and this reflects both the overall reduction in import demand and the temporary suspension of imports associated with the weak flesh investigations in Brazil. Beef consumption in Europe has held up well, despite firmer prices. Prices for most cattle types have been up during the middle months of 2017, on average by 5% YOY (see Figure 8). The initial rise in prices in April may have been triggered by the influence of rising pork prices, and prices have held at slightly elevated levels in response to tight availability. The Q4 outlook will depend on the strength of ongoing demand in export markets, as well as the development of beef availability, which appears to be tightening. Indonesia: beef prices expected to ease In an attempt to lower beef retail prices during Ramadan and Lebaran, Indonesia permitted imports of frozen buffalo meat (carabeef), setting an import quota for 2017 at 51,728 tonnes. Imported carabeef through early June reportedly reached 32,704 tonnes. Additional imports of 5,000 tonnes were scheduled for the end of August and September, respectively, in order to maintain sufficient inventory before year-end. Following a peak at IDR 119,300/kg in late June, beef prices dropped in July, but crept up again in August (see Figure 9). Despite ample supply of frozen carabeef imports, August beef retail prices averaged IDR 117,174/kg (+0.4% MOM, +2.5% YOY), as the demand for the Idul Adha festival is mainly for fresh beef. Rabobank expects beef retail prices to come down slightly in Q4 2017, driven by lower Australian live feeder prices, a stabilising AUD/IDR exchange rate, and seasonally lower consumption. Current dry conditions in Australia may put cattle-rebuilding efforts on hold and prompt some near-term liquidation. Live-cattle imports from Australia in the first seven months totalled 253,297 head 30% lower, compared to the same period last year. The drop steepened to around 50% YOY in June and July, even as feeder prices eased to AUD 3.10/kg lwt to AUD 3.30/kg lwt from the AUD 3.55/kg lwt to AUD 3.75/kg lwt peak in January Weak feedlot margins were principally to blame, in addition to competition from cheaper frozen carabeef imports. Feedlot margins are currently estimated to have dipped below 5%. Yet, based on a live cattle price of IDR 40,000/kg and a carcase price of IDR 85,000/kg, slaughterhouses are still calculated to earn a decent margin of about 15%. Slaughterhouse margins could expand modestly in Q if lower expected feeder prices are not fully passed through. But if the rupiah were to weaken further, some margin deterioration may be expected. Figure 8: EU cattle prices by category, Jan 2014-Jul Figure 9: Indonesian national beef prices, Jan 2015-Aug ,000 EUR/100kg cwt Cows O3 Steers R3 Young bulls R3 Heifers R3 IDR/kg 120, , , , ,000 95,000 Jan-15 Feb-15 Apr-15 May-15 Jul-15 Aug-15 Oct-15 Nov-15 Jan-16 Feb-16 Apr-16 May-16 Jul-16 Aug-16 Oct-16 Nov-16 Jan-17 Mar-17 Apr-17 Jun-17 Aug-17 Source: European Commission, Rabobank 2017 Source: Indonesian Ministry of Trade, Rabobank /9 RaboResearch Beef Quarterly Q September 2017

6 Mexico: production up and cattle exports up Mexican cattle exports continue to increase. Compared to last year, exports are up 25.4% for the period January to August, and they are projected to reach 1.3m head this year (see Figure 10). Heifers are making up an increasing component of the exports. The percentage of heifers being exported this year is up 97% compared to last year and now represents on average 18% of cattle exports. These numbers are reaching percentages close to 2013 and 2014 (21% and 22%, respectively) levels. This signals a potential slowdown in the retention of beef cows for the coming years. Mexican beef production is higher this year, up 2.4% for the first half of the year, compared to The increase in production has mainly been driven by the number of live cattle going for further processing, as weights are 2% lower compared to last year. Cattle availability for further processing this year is expected to be 6.2m head, an increase of 4.3% compared to Mexico continues to be a net exporter of beef. Beef exports to the US totaled 132,000 tonnes for the period January to June, an increase of 31% on On the other hand, imports of beef are up by 8% compared to last year. 109,000 tonnes have been imported, with 91,000 tonnes coming from the US and the remainder from Canada. Feeder cattle prices have fallen 8.4% compared to the first half of last year, going from MXN 48.8/kg to MXN 44.7/kg. While feeder cattle prices have decreased, beef prices have seen an increase of 7% compared to the first half of last year. As the peso depreciated against the US dollar, inputs priced in US dollars have increased in peso terms, causing inflation and price adjustments. Input costs have increased, including yellow corn, which has seen a 4% increase on last year. However, the peso has been able to recover, and now input prices are expected to stabilise. New Zealand: export volumes down A strong NZ dollar, combined with declining US imported beef prices, saw New Zealand slaughter prices ease slightly over the last quarter, with prices dropping 2% in both islands. As of the start of September, the North Island bull price averaged NZD 5.50/kg cwt (+2% YOY), while South Island bull prices averaged NZD 5.05/kg cwt (-3% YOY). Similar price declines have been experienced in other cattle classes. New Zealand s total Q2 beef export volumes were down 5% on last year s Q2 volumes; however, with the total value of exports only falling 2%, New Zealand received higher returns for the product it did export. Exports to New Zealand s two largest markets, the US and China, were steady over this period, increasing in value by 1% and 4%, respectively (see Figure 11). US imported-beef prices for lean trimmings have been trending downward since June, as demand for grinding beef from US importers declines on the back of increased US domestic production. The imported US 90CL price is now sitting 11% below its five-year average (after ending Q2 12% above its fiveyear average). Given the significant volume of manufacturing beef that New Zealand exports to the US, if this trend continues, it will put downward pressure on New Zealand farmgate prices. Japan s lifting of tariff rates for frozen beef imports puts New Zealand at a significant disadvantage against Australia (Australia s tariffs are held at 27% against the 50% rate for New Zealand) and will force exporters to divert product from Japan into alternative markets. New Zealand s prime beef exports will be impacted most significantly, with Japan being a high-value beef market for New Zealand. (Japan is New Zealand s fourthlargest export market by value and sixth-largest by volume.) New Zealand s export-cattle supply continues to track below last year s levels, with the total number of cattle slaughtered season-to-date down 5.9% on this stage last season. This general reduction in supply, combined with the seasonal tightening of supply through winter, has helped support domestic slaughter prices, as processors compete to procure what stock is available. Rabobank is expecting New Zealand s cattle supply to remain limited until at least November, which should ensure any further price-easing in the short term is not significant. However, as domestic supply increases later in the year, prices are likely to face downward pressure. Figure 10: Mexican monthly cattle exports, Jan 2014-Aug 2017 head 200, , ,000 50,000 Figure 11: NZ beef exports, year-on-year change, % 30% 20% 10% 0% -10% -20% -30% -40% 0 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Value Volume Source: GCMA, Rabobank 2017 Source: BeeflambNZ, Rabobank /9 RaboResearch Beef Quarterly Q September 2017

7 US: market approaching a seasonal low US fed-cattle prices have made a tough adjustment. After peaking at USD 143/cwt in early May, fed-cattle prices have suffered a steep decline, currently trading in a range of USD 103/cwt to USD 105/cwt (see Figure 12). Limited slaughter capacity and escalating fed-cattle supplies have provided processors with a massive leverage advantage that has made selling cattle difficult. The price spread between comprehensive cutout values and the fed-steer price is at historically low levels, showing processor leverage. Placements of cattle into feedyards have been above year-ago levels for eight of the past nine months, leaving little question as to what fed-cattle supplies will be for the remainder of the year. The big uncertainty in the market is carcass weights. Year-to-date carcass weights have been below year-ago levels, holding beef production at a lower percentage rate than slaughter. Carcass weights made a seasonal low in early May, at 832lb, 33lb below the same week a year ago. Since making a low, carcass weights have been escalating above the seasonal norm and are currently 9lb below year-ago levels. Aside from the cattle making money, cattle feeders were motivated by exceptionally wide basis (cash-prices premium to futures prices). For much of the spring, this enabled hedgers to sell cattle with a USD 4/cwt to USD 8/cwt premium a massive motivator to sell cattle at the earliest opportunity. Those huge basis premiums have been washed out of the market, and in recent weeks, futures have been building a premium to cash, encouraging producers to not only defer sales, but also encouraging them to add additional weight to cattle. In spite of the huge imbalance in the live price to cut-out ratio, cattle feeders are just now starting to sell cattle at, or below, break-even. Seasonal considerations and market action both suggest the market is approaching a seasonal low. Average carcass weights for the remainder of the year will be key as to how fast the market recovers. Feeder-cattle prices have held exceptionally well during the summer, in a range of USD 145/cwt to USD 155/cwt, supported with strength in the deferred live-cattle futures, as well as exceptionally dry weather conditions in the Dakotas and the Mountain West. This has forced early movement of cattle that could provide orderly sales and price support of yearlings for the fall. Aggressive placement of cattle year-to-date could also slow placements for the remainder of the year. 400lb to 600lb calves are currently selling in a range of USD 165/cwt to USD 170/cwt. Calf prices have been incredibly steady throughout the summer. Seasonal price weakness is expected as offerings increase during the fall. Current expectations for fall lows are in a range of USD 140/cwt to USD 150/cwt well above the USD 125/cwt lows of a year ago. Year-to-date beef-cow slaughter is up 11.2% over a year ago. In spite of the increased slaughter rate, cullcow prices have held exceptionally attractive levels. Cow prices are expected to see additional price pressure through the fall, from conventional fall culling. Exceptionally strong prices for lean trimmings have been supporting cull-cow prices. Reduced imports of manufacturing beef from Australia and New Zealand have supported the market. Currently, the price spread of imported and domestic 90CL trimmings is exceptionally wide, suggesting the imported price and seasonal increased cow slaughter will pressure the market throughout the fall. Figure 12: US Five-Market Area Steer Price, Jan 2015-Sep USD/cwt Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Five-year average Source: USDA, Rabobank /9 RaboResearch Beef Quarterly Q September 2017

8 Dashboard Legend and units Production Exports Imports 1,000 tonnes 1,000 tonnes 1,000 tonnes = year-on-year change All prices in local currencies Australia: production and exports rise Production Exports Cattle prices (AUD/kg cwt) EYCI Export beef prices (AUD/kg FOB) US 90CL Cow Jul 17: 189 YTD: 1,227 Aug 17: 98.7 YTD: Aug 17: 5.53 YTD: Aug 17: 5.59 YTD: % -2% +22% steady -7.2% +1.5% -10% +3% Brazil: exports increasing Production Exports Live cattle price (BRL/15kg) Beef wholesale price (BRL/kg) Mar 17: YTD: 1,789.0 Aug 17: YTD: Aug 17: YTD: Aug 17: 9.31 YTD: % -0.7% +34.4% steady -11.2% -11.1% -1.8% -0.8% China: stable, but seasonal demand to kick in Production Consumption Import Cattle prices (CNY/kg) Retail beef prices (CNY/kg) 2016: 7, : 8,550 Jul 17: 63.4 YTD: Aug 17: YTD: 28.1 Jul 17: 62.0 YTD: % +6.0% % +12.8% +1.3% -0.5% -0.2% -0.5% EU: slowing production indicates a future swing in trade balance Production Export Import Cattle prices (EUR/kg) Young Bulls R3 Steers R3 Cows O3 Heifers R3 Jun 17: 636 YTD : 3807 Jun 17: 69 YTD : 381 Jun 17: 22 YTD: 169 Jul 17: 3.72 Jul 17: 4.08 Jul 17: 2.96 Jul 17: ,9 % -0.2% +4,12% +15,9% -27,1% -15,3% +2,8% +4,6% +8,8% +2,9% New Zealand: export volumes down Production Exports Cattle prices (NZD/kg cwt) Export beef prices (NZD/kg FOB) Jul 17: 115 YTD: 2,206 Jul 17 : 35.1 YTD: Sep 17: 5.50 YTD: 5.44 Jul 17: 7.23 YTD: % -6% +15% steady +2% +2% +3% steady US: market approaching a seasonal low Production Exports Imports 5 Market Steer (USD/cwt) Fed beef cutout (USD/cwt) Jul 17: YTD : 7,707 Jun 17: YTD: Jun 17: YTD: Aug 17: Aug 17: Δ -8% +4% +12% +15% +4% -7% -4.4% steady 8/9 RaboResearch Beef Quarterly Q September 2017

9 Imprint RaboResearch Food & Agribusiness far.rabobank.com Food & Agribusiness Animal Protein Global Sector Team Justin Sherrard Global Strategist Don Close US Adolfo Fontes Brazil Angus Gidley-Baird Australia Blake Holgate New Zealand Beyhan de Jong EU Nan-Dirk Mulder EU Gorjan Nikolik EU Chenjun Pan China Andrick Payen Mexico Ben Santoso South-East Asia 2017 All rights reserved This document is meant exclusively for you and does not carry any right of publication or disclosure other than to Coöperatieve Rabobank U.A. ( Rabobank ), registered in Amsterdam. Neither this document nor any of its contents may be distributed, reproduced, or used for any other purpose without the prior written consent of Rabobank. The information in this document reflects prevailing market conditions and our judgement as of this date, all of which may be subject to change. This document is based on public information. The information and opinions contained in this document have been compiled or derived from sources believed to be reliable; however, Rabobank does not guarantee the correctness or completeness of this document, and does not accept any liability in this respect. The information and opinions contained in this document are indicative and for discussion purposes only. No rights may be derived from any potential offers, transactions, commercial ideas, et cetera contained in this document. This document does not constitute an offer, invitation, or recommendation. This document shall not form the basis of, or cannot be relied upon in connection with, any contract or commitment whatsoever. The information in this document is not intended, and may not be understood, as an advice (including, without limitation, an advice within the meaning of article 1:1 and article 4:23 of the Dutch Financial Supervision Act). This document is governed by Dutch law. The competent court in Amsterdam, the Netherlands has exclusive jurisdiction to settle any dispute which may arise out of, or in connection with, this document and/or any discussions or negotiations based on it. This report has been published in line with Rabobank s long-term commitment to international food and agribusiness. It is one of a series of publications undertaken by the global department of RaboResearch Food & Agribusiness. 9/9 RaboResearch Beef Quarterly Q September 2017