20 July 2011

Rising profitability in the beef production sector could be tempered this year by higher grain and feed prices, an international industry conference has warned.

The global agri benchmark network, made up of more than 35 beef economists from 25 countries, including EBLEX senior analyst Mark Topliff of the UK, held a summit in Austria to discuss trends in the industry and emerging patterns.

The economists warned that, although the gap in production costs across the globe is closing because of rising land prices in countries like Argentina and currency fluctuations, the sector is likely to see profits dampened by the higher input prices experienced in the first half of 2011.

“What we found is that globally in 2010, beef prices had recovered driven by an increase in demand,” said Mr Topliff, of the Agriculture and Horticulture Board’s Market Intelligence department.

He continued, “Exchange rate movements, and price developments for calves and store cattle helped profitability. However, it is expected that grain and feed prices could ultimately lead to lower profits in some countries this year.”

The network’s coordinator, Dr. Claus Deblitz of the Johann Heinrich von Thünen-Institut in Germany, added, “The question now is where and with which type of production systems beef will be produced in the future, and this is in the focus of agri benchmark’s future work,”

Agricultural economists from 25 countries work together in the agri benchmark beef and sheep network to analyse and discuss the recent developments and the future trends of beef and sheep production in the most important production regions in the world. The Johann Heinrich von Thünen-Institut (vTI) and the German Agricultural Society (DLG) coordinate the activity.

The annual comparison of typical cow calf and beef finishing farms is a core activity of the network and shows the main differences in the beef production systems, their costs and profitability using a globally standardised approach.

Agri Benchmark Network conclusions

Over the course of the last session, the network of economists also speculated that some Asian countries, as well as Russia, face a growing gap between domestic supply and demand.

Furthermore, in a number of EU-27 countries, such as France, Spain, Italy and Austria, the possible shift of single-farm payments into land-based payments could have negative income impacts on finishing farms with historically higher stocking rates

Beef continues to be affected by developments in the other meat sectors, and vice versa. High grain prices push grass-fed beef production out of locations where crop production becomes profitable. The group has announced that it will produce a costs of production report to be published in September.