AUSTRALIA is well placed to capitalise on increased global demand for cheaper cuts of beef as rampant inflation and slowing economic growth impacts on global markets.
According to the latest Rabobank report, Australia should benefit from this increased international demand for 'trimmings', particularly from the US, as consumers trade down.
Trimmings are typically used in the production of ground or minced beef, particularly used in the globally massive hamburger trade.
Major importers of trimmings (the cheaper meat cuts which remain after prime cuts are removed) also include China, Japan and Korea.
"Evidence of declining consumer confidence in the face of slowing economies and rising inflation is starting to build," the Rabobank's Q3 Global Beef Quarterly report says.
"In general, beef markets are resilient to changes in economic conditions.
"However, we do see movement within supply channels and price points that tend to favour cheaper options such as mince/ground beef and quick-service restaurants over the more expensive cuts and consumption channels."
The report says the US and Korea are facing high inflation pressures, while China and Japan are continuing to struggle with slower economic growth because of COVID.
The US drought is also a key factor.
Drought-related high domestic beef production in the US is currently reducing the need for imported trimming products. However, higher import volumes will be needed if the drought breaks, the report says.
Australia in the box seat
Rabobank senior animal protein analyst Angus Gidley-Baird said Australia's increasing cattle numbers will result in additional grass-fed and female slaughter numbers and increased supplies of trimmings.
However, the challenge was Australia's currently limited processing capacity, he said.
"Unless we can correct this, our ability to ramp up production and capitalise on any trimmings demand growth will be limited."
"Unless we can correct (Australia's processing capacity), our ability to ramp up production and capitalise on any trimmings demand growth will be limited."
- Angus Gidley-Baird, Rabobank
Rabobank says most global beef retail prices continued to increase in Q2 or remained steady with prices in most markets sitting between 5 per cent and 11pc higher than quarter two in 2021.
The UK is a notable exception, as consumers shy away from high retail beef prices.
Cattle markets around the world also remain favourable, the report says, supported by either seasonal conditions - in the case of Australian and Brazil - or strong demand, in the case of the US.
Mr Gidley-Baird said cattle prices in Australia remained historically high.
"Although at the end of July the Eastern Young Cattle Indicator for weaner age cattle had dropped 23pc since the beginning of the year, there is no need to panic.
"Since the beginning of August, we have seen prices rise again.
"We feel that the change in the seasons is prompting producers to hold cattle, reflected in lower saleyard numbers and with weaner cattle prices dropping the margin for backgrounders has improved which we believe has stimulated some additional demand."
Mr Gidley-Baird said although Australia's cattle slaughter numbers were slowly increasing, volumes remain historically low. He said he expected overall production for the year to be similar to 2021 at 1.9 million metric tonnes.
