Despite labour shortage and food price inflation issues, Dutch leader in agriculture and food financing Rabobank remains positive for 2022 in its recently released outlook for meat protein.
Food price inflation is an issue, but, as Rabobank points out referring to the 20-point increase in the food price index, the sector will carry increased prices.
Food service and retail outlets will be expected to push back against this to protect their margins. However, Rabobank sees difficulty in pushing back against many of the increased cost factors such as labour, energy and sustainability costs over the next year, but there will be regional variations.
Rabobank also identifies labour shortages as a global problem despite its high profile in the UK and while increased wages will tackle the supply issue, it will have an impact on production costs.
Industry attempts to automate production processes are both costly and slow, according to the report.
Rabobank also doesn’t foresee a meaningful reduction in shipping costs, which have increased dramatically this year due to the market disruption caused by COVID-19.
It says that energy costs will continue to be volatile, with little prospect of significant reduction.
After a 15% surplus in cattle supply over processing capacity for much of 2020 and 2021, the supply and demand balance is expected to return in North America in 2022.
Domestic demand is expected to fall slightly from pandemic heights, but this will be offset by a 2.7% reduction in beef production and continued export growth, driven by demand from China.
In Brazil, prices are expected to remain firm but below the 2021 levels, with growing cattle numbers since 2019 and increased domestic purchasing power driving the home market, according to Rabobank.
Chinese demand will continue to drive Brazil’s export market - assuming BSE suspension is lifted - while Argentina’s exports are also expected to recover following the suspension in 2021.
Rabobank also predicts that China’s beef production growth will be low, with the increasing demand being met by imports, with increasing demand for premium cuts.
Australia and New Zealand
Herd rebuilding in Australia has been taking place in 2021 and 2021, which will mean increased supply from the low of 2021 for beef and sheepmeat.
This has underpinned particularly high process in 2021 and Rabobank expects that these will ease over the course of 2022.
For New Zealand (NZ), Rabobank is predicting a further 0.85% decline in sheep numbers in 2022, driven by drought and elevated carbon prices pushing land into forestry use.
NZ beef will benefit from less Australian manufacturing beef going to the US, while NZ also enjoys a good trading relationship with China, keeping it as a major outlet for exports.
Rabobank is predicting that the challenges of labour, energy and freight costs will continue into 2022, but with markets well balanced with supply, prices are also expected to remain stable.
Of course, with rising costs in the chain, stable prices aren’t enough for farmers.
The key question will be can consumers be persuaded to pay more for beef and sheepmeat rather than reduce the volume consumed.
For Irish producers, the prospects for sheepmeat remain strong, while the increasingly open trading market for beef means strong international markets suggests there won't be a major influx of supply into the EU.
Of course, all depends on the Brazil-China trade route for beef being reopened sooner rather than later.