While the U.S. cattle and beef markets should continue to offer profit opportunities, it’s the actors on the global stage that will set the larger tone for beef prices in 2014. That’s according to a Rabobank report that both looks at market dynamics in the first quarter of 2014 and peers into the future of the global beef trade.

Rabobank’s Food & Agribusiness Research team says that beef market fundamentals remain positive, with prices driven up across the globe in the first quarter of 2014 by firm demand as well as further tightening supply due to drought-induced herd retention in the U.S. and adverse weather conditions in Brazil and Australia – the three main beef exporters.  Combined with fluctuating exchange rates, these events have impacted competitive positions in export markets, with Brazil and Australia gaining export share in the first quarter at the expense of the U.S.

U.S. market volatile

For the U.S. cattle and beef markets, volatility was the biggest factor in the first quarter. Cash fed cattle prices hit a record $150- to $152/cwt and feeder cattle and the beef cutout also reached stratospheric heights.

“The key driver for the record cutout values was the surge in the prices of beef trimmings, beef chucks and rounds that could be used as alternative sources for ground beef,” the report says. Fed cattle chucks and rounds heading to the grinder is the result of a steep decline in cow and non-fed slaughter levels, the report says.

Rabobank economists forecast that fed cattle prices have reached a seasonal peak and will tail off in a normal seasonal pattern into the summer. Summer lows are projected in the $130/cwt. level for late July and early August.

“Feeder cattle prices may already be near the seasonal low,” the report suggests, “which could be delayed until as late as May, but are not expected to be measurably lower that the current trading range.” Given the short supply of feeders ready to go on feed, lower feed grain prices, continued excess feeding capacity and a return to profitability in the cattle feeding sector, the bank’s economists think prices will rise toward a seasonal high in the fall, with current projections suggesting the cash register will ring somewhere around $190 on average.

China leads globally

The bank says global beef demand growth will continue to come mainly from China. Although 2014 imports in China are not expected to reach the growth levels experienced in 2013, they will grow as Chinese farmers take little interest in government-supported production expansion and strong profits, and the market opening for Australian chilled fresh beef products. Chinese market opening to Brazilian beef may happen imminently.

“Prospects for the global beef industry remains positive in the second quarter, with further possible upside due to continuing pressured beef supply and scarce supply of competing proteins which will continue to impact competitive positions,” explains Rabobank analyst Albert Vernooij. “Brazilian cattle prices and exports have surged to record levels, and Australian droughts have encouraged historically high slaughter levels to meet global demand.”

Here are the bank’s regional outlooks:

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