TL;DR: The US beef trade faces a growing deficit with rising imports and stable exports. Production remains high despite challenges, with domestic demand increasing due to economic strength and a stronger US dollar.
Trade Balance Shift
The latest report from the US Department of Agriculture highlights significant changes in beef trade projections. While US beef exports are seeing a slight increase, the import forecast has significantly risen by 184,000 tonnes to a total of 1.89 million tonnes. Consequently, the trade deficit for 2024 is expected to deepen to 622,000 tonnes, marking the largest since 2008.
US Production Stance
Despite a decrease from the late 2022 peaks, US beef production remains high. Contrary to previous climate models predicting prolonged El Niño effects conducive to reduced beef production, such scenarios have not materialised. Current predictions by the NOAA give an 85% chance of El Niño ending by mid-year and a 60% likelihood of La Niña by August, potentially delaying the reduction in beef output.
Forecast Adjustments
The 2024 production forecast has been adjusted up by 157,000 tonnes to 12.06 million tonnes, a 2% drop from the previous year. This is less than initially expected, suggesting a slower start to herd rebuilding, potentially only beginning in earnest in 2025.
Domestic Demand and Imports
Despite higher production forecasts, US beef imports are still expected to rise sharply, driven by an increase in domestic consumption projected at 343,000 tonnes more than previous forecasts. Robust demand continues, supported by a strong economy and a growing population. The US economic growth outpaces that of other G7 nations, coupled with comparatively low inflation.
Currency Strength and Market Dynamics
The US dollar has strengthened significantly against other major currencies since 2021, enhancing the purchasing power for imports. For instance, it has risen by 11% against the Chinese Yuan and 50% against the Japanese Yen. This makes US exports less competitive abroad but imports more affordable, likely redirecting beef flows into the US market.
Despite efforts to rebuild the US beef herd, exports to the US are set to increase as domestic production struggles to keep pace with rising demand. The ongoing economic conditions and currency strength further complicate the dynamics, extending the period of lower production.
