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In November, Rabobank's Global Cattle Price Index dropped 2% from Q3 levels.  This was mainly driven by the decline realized in Brazil, Australia, Argentina and Canada, which more than offset the rise seen in the US and New Zealand.  The strengthening of the greenback against many currencies combined with weaker demand across many important countries has also contributed to the downtrend in global cattle prices denominated in US dollars.  In a year-over-year comparison, the Index is beginning December down 11% from where it began in November.

Commenting on the outlook for 2013, Rabobank analyst Guilherme Melo said:  "We expect to see global supply hovering around 2012 levels, with minor ups and downs being determined by the extent to which the increase in Southern Hemisphere will outpace the reduction in Europe and the US.  On the demand side of the equation, the broader picture points to another year of relatively weak consumption on the back of the still sluggish economy, as world GDP is expected to grow only slightly in 2013.  The scenario is worse where production is set to decrease, such as North America and Europe, which poses additional pressure for beef companies located in these regions to pass on rising cattle prices to consumers.  Additionally, as such countries rely on grains to feed their animals they are likely to see a reduction in their competitiveness in the international market.

"Conversely, companies located in South America, particularly in Brazil, should benefit from herd recovery and the acceleration of the economy, which offer processors an opportunity to increase/sustain their margins.   Nonetheless, headwinds for the South American industry will probably blow from the Middle East and North Africa, where companies are likely to face a tougher environment for expanding exports in 2013.  This reflects the uncertainties resulting from political and economic changes after the Arab spring and ongoing internal conflicts, which are contributing to weakening activity." Melo added.

A bullish factor for the industry is the strong need for supply discipline in the poultry and pork sectors.  Rabobank thinks production cuts are likely to come about, driven by negative margins in the wake of severe feed cost increases.  To the extent that this increases poultry and pork prices, it may also benefit the beef industry as the gap between beef and these two meats prices narrows and possibly shifts demand towards beef.

Brazil

Live cattle prices increased by 4% between October and November on the back of the seasonal dry period combined with limited supply from feedlots.

USA

Weather has been the determining marketing influence over the past 18 - 24 months and currently the entire central US cattle feeding area is under severe to exceptional drought conditions. A continuation of drought conditions into 2013 will force increased numbers of cattle into feedlots and could result in rationing of feed.

Australia

Lower cattle prices have led to increased exports and production is set to increase. However, prices have been affected by weaker demand from the key markets of Japan and Korea.

Argentina

Beef production is expected to rise but exports have declined on the back of poor exchnage rates and a 15% export tax.