NEW YORK – Growing supplies of proteins and fallout from frayed trade relations will be top-of-mind for stakeholders in the US beef market, Rabobank said in its Beef Quarterly Q3 Report.

“There is a whole laundry list of issues creating uncertainty and market volatility in the US, most of which affect global beef trade,” Rabobank researchers noted. But the report highlighted five issues as most important.

First, Supplies of US beef remain fairly tight with year-to-date production up 3 percent compared with expectations of 5 percent growth, according to Rabobank. Strong basis levels have encouraged hedged producers to market cattle aggressively in the first half of 2018. “Also contributing to lower volumes is the general fear that increased numbers of cattle on feed and seasonal considerations would drive prices lower,” Rabobank said. Forecasts for 2019 beef production call for an increase of 2.5 percent to 3 percent.

An abundance of protein in the US has highlighted the need for more exports. Pork production is leading the increase in total protein supplies with year-to-date production up 4 percent and 2019 pork production forecast to increase 4 to 5 percent. Poultry production climbed 2.5 percent, however price pressure and negative returns are expected to hold further expansion in check, according to Rabobank. Domestic consumption is expected to absorb some of the supply with total domestic protein consumption expected to be up to 226 lbs. in 2019 compared with 222 lbs. this year.

Another important issue facing the US beef segment is uncertainty surrounding trade agreements. “The unnerving fact about current US trade policy is its frequent changes,” Rabobank said. The beef trade has been less affected by the US trade war with China because the market there opened only last year. A bigger concern is the lack of progress on renewing the North American Free Trade Agreement (NAFTA). On Aug. 28, the White House announced an agreement with Mexico had been reached. US officials currently are in negotiations with Canada which imposed tariffs on $170 million worth of US beef products. Rabobank said that “…a successful renewal will be reached; the uncertainty is to when.”

Drought conditions in the US are yet another factor driving uncertainty and market volatility, Rabobank said in its report. “Currently, 15 states have extreme to excessive drought conditions and half of the US beef cow herd resides in these states.” Rabobank said the risk of herd liquidation is high because of damage to pastures and poor range conditions. However, the US cattle herd is still expanding at a slow pace based on factors such as the ratio of cow slaughter to total slaughter and heifers as a percent of fed slaughter.

Finally, lower prices for beef at retail and a strong economy has consumers continuing to buy beef despite the abundance of alternative proteins on the market. Additionally, strong exports have continued to move product. Exports of beef to South Korea are up 41 percent year-to-date, while exports to Hong Kong increased 11 percent. “However,” Rabobank warned, “with such a saturated market it will not take much to tip it over.”