Listen: Field to fork: US grilling season and Brazil’s role in beef trade (part 1)

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William Bland:

Hi, and welcome to the Platts Commodities Focus Podcast from S&P Global Commodity Insights, where today we will be talking about the agriculture and food markets, from field to fork. On June 3rd, Platts started publishing daily price assessments for chicken in four key locations. Those can be found in our daily protein publication, alongside price assessments for beef, which we launched in March.

I'm William Bland, one of two managing editors on the agriculture and food team for Europe, the Middle East and Africa. I'm joined John-Laurent Tronche, who is also on the agriculture and food team, and is senior managing editor for North America, as well as Rafael Savoia, managing editor for Latin America, based in Sao Paolo.

Agricultural crops, animal food, protein and global trade flows and continually changing. Platts price assessments have given insight into those changes, as well as the location of the most competitive producers. I'd like to start today with beef. When we talk about beef, the US is the largest producer and consumer in the world.

John-Laurent, from your perspective, what's going on in the US at the moment?

John-Laurent Tronche:

Well, we're definitely right into the throes of grilling season. It's true that, when you think about beef consumption and production around the world, the US certainly comes to mind. We're a top beef producer, a top beef consumer. Right now, is the beginning of what we call grilling season. We just had Memorial Day holiday about one week ago, which is the unofficial kickoff to the season of cooking outside, on charcoal or on a gas grill. There's a number of beef-friendly holidays that we've got coming up here, in addition to Memorial Day. We've obviously got Father's Day in mid-June, Independence Day in July, Labor Day at the end of the summer. But just general sense, beef consumption typically spikes in the US in the summer.

The story though is a bit different and it's been changing over the last 25, 50 years. We've seen that, even though the US remains top among consumers of beef in total volumes, the actual beef consumption per person has actually dropped by about half over the last 50 years or so.

William Bland:

Wow. That's massive.

John-Laurent Tronche:

It's a big change. We've really swapped out one protein for the other. When you think back, 50 years ago, the average American would eat somewhere around 100 pounds of beef per person per year. That's dropped to around 55 or 60 pounds of beef per person per year. The suggestion here is that diets have changed. It's true, that the average American eats less beef than they ever have. But what is true as well is that actually, a minority of the population continues to eat a majority of the beef. That was according to a university study about a year ago or so. Beef consumption definitely remains high. Not only at this point of the year, but also among the average American, but the diet itself has changed.

William Bland:

For our non-American listeners, 100 pounds in kilos?

John-Laurent Tronche:

Is about half, about 50 to 55 kilos per person per year.

William Bland:

Wow, yes. Sorry, I interrupted you as you were talking about the changes.

John-Laurent Tronche:

Definitely we're well into grilling season now. This is the time of the year that the US populous really goes outside and fires up the grill, whether that's to make burgers, or tacos, or grill a steak. This is definitely beef consumption season in the US. That certainly kicked off, as I said, with Memorial Day, but it continues throughout the summer, and is peaked with a number of holidays that we obviously favor grilling.

But there's really a big tidal shift in the way and the products that we're grilling. Whereas the US, historically, had a heavy domestic herd to rely on, that's definitely changed really over the last 10 years. That change has definitely precipitated as well.

William Bland:

Why is that? What's happened to the domestic herd? Why has it shrunk?

John-Laurent Tronche:

A number of different factors. The US domestic herd has continued to shrink. That's due to drought, to just cyclical cycles in the size of the herd. It's certainly true to say that the domestic herd, the domestic US cattle herd is at the lowest that it's been since the 1960s. It definitely is cyclical low. While that's certainly a headline number that gets a lot of attention, it's also important to know that that doesn't tell the full story.

When you account for increasing cattle weights and growth technology, it's also true to say that even though the domestic herd is as low as it's ever been, or at least as low as it's been since the 1960s, we can actually produce more beef with fewer head of cattle. While there's maybe no expectation that we'll ever hit historical cattle inventory highs again, it is safe to say that the US domestic herd is still producing an ample amount of beef.

That said, it has increased the necessity of imported beef, something we've been doing for a number of decades. But that reliance on imported beef has only grown.

William Bland:

Just before we move to that side of the story with Rafael. Saying that the US is producing more beef with fewer head of cattle, that's because the cattle themselves, because the bulls are getting bigger, or because the industry is getting more efficient in producing more meat?

John-Laurent Tronche:

It's both, really. You're absolutely right that the cattle are larger today than they were 10 years ago, or 20 years ago, or 30 years ago. We're producing more beef per cow than we ever have been, through technological advances. We've also gotten a lot more efficient in our use of land, in the time that it takes to produce a cow. Get it into grazing, get it into the feed lot, and then eventually into production. Just as an industry, the beef industry has just become more efficient and been able to produce more supply with fewer resources.

William Bland:

What is that typical period, from the lifespan of a cow?

John-Laurent Tronche:

It's about three to four years is what we're looking at.

William Bland:

Okay. In that case, Rafael, John-Laurent has laid the challenge for you. How is Brazil filling this deficit, this gap?

Rafael Savoia:

Yes, William. Brazil has surely been able to fill the gap with lower US production. Brazilian herd has been increasing over the last years, and it reached a record of nearly 235 million heads in 2022. We are being able to supply beef to the world, and even to US.

Recent data saying that Brazilian is slaughtering and is producing a lot of beef recently, specifically in 2024, we're expecting a very, very high production, and even putting pressure on beef prices. This increase is not only in Brazil, but it's also in Australia, which is a very large global producer. The USGA projects a 7.7 growth in Australian beef production in 2024.

William Bland:

That's percent?

Rafael Savoia:

Yeah.

William Bland:

Wow, that's quite significant. Is it normal ... Sorry to interrupt. Is it normal to see in the beef sector, this fluctuation from year to year? Because for an outsider, 7.5% seems quite a big growth in production from year to year. Is that common?

Rafael Savoia:

Beef production, it comes in cycles. Usually, you'll have a period of high prices, then you start having more cows and having more baby animals to grow. Then you have period of low prices, where there is a bigger female slaughtering, and then it leads to a higher beef production. This is what happens in Brazil this year. Over the last three months or four months, we have seen in Brazil, a very large volume of female slaughtering that is even higher than the male cows.

William Bland:

Can we talk briefly about prices then? Because the two price assessments that we launched initially for Platts in beef were for the beef that is used in processing, correct? And most obviously, what you might imagine going into hamburgers. What's happened, John-Laurent, in that? What's been the dynamic in those prices since you launched the assessments in Houston?

John-Laurent Tronche:

Definitely we've seen, over the last really year, but you look more specifically in 2024, the storyline has been increase prices. We've seen prices for imported beef lift the overall value of beef, whether it's domestic beef or imported beef in the US. A lower domestic herd, therefore an increased price for the availability of domestic beef, coupled with the necessary cost to bring in beef from these faraway locations like Australia and New Zealand. Or in some places, a little bit closer, like Brazil or Argentina.

These different factors have really lifted the overall value of beef in the US to prices we've really never seen before. You're looking at $2.60 a pound, 2.75 a pound, upwards of maybe $3 a pound if you're looking at fresh domestic. Again, for people who really aren't familiar with the dollar per pound level, we're looking at $5500 to $6000 a metric ton, or even greater than that. We've seen increased value for beef in the US.

It's been a bit of a lull over the last couple weeks, as we've moved into grilling season. Again, the kickoff of grilling season really at the end of May, beginning of June, necessitates that the beef buyers of the world, or really of the US, have to secure that supply back in March and April. At the moment, we've seen a bit of a sideways move to the value of beef. But it's still, in relative terms, much, much higher than maybe it would have been 12 months ago, 24 months ago, or even several years ago.

William Bland:

Yeah, that's interesting. Maybe it's a good point to move to something you mentioned earlier, which would be the transition to chicken. Do you see consumers as particularly sensitive to switching between proteins? If beef prices are rising that much, do people shift to chicken? Or is there other reasons driving that transition?

John-Laurent Tronche:

There's a lot of different reasons. Certainly, diet has been one of the major contributors to the, let's call it, swapping it of beef consumption for chicken. Chicken has been the most popular protein of choice for the American, the average American, since around 2010 or so. That increase of consumption has only continued to keep pace. The US, again, has lowered its consumption of beef per capita, it has increased its consumption of chicken per capita. Diet is very often attributed as a major reason for that.

But let's not discount price either. As beef rises in value, people are looking for alternate proteins. That could be the chicken leg quarter, that could be a chicken breast, that could be pork. Price is certainly a consideration for the average consumer as well. It's not even just swapping out one protein for another, but it may be that somebody goes to the grocery store down the street, and rather than buying that nice rib-eye or that that nice New York strip, they instead opt for ground beef and make something like a cheeseburger for the weekend. It's swapping out within the same protein category, or even swapping out one protein for another all together if the cost is significant enough to make a difference in that person's buying habits.

William Bland:

Rafael, before we close off perhaps, in domestic consumption in Brazil, the meat of choice would be chicken presumably?

Rafael Savoia:

Well, I think that globally, it's very, very price-driven. In US, you have a lot of alternatives because of health. But we see this flow or this change on the habits very price-driven. In Brazil, I think that it's more similar than what happens in the world. When you have a higher income of the country or of the population, you start seeing a high consumption of poultry, of chicken, and then it moves to pork, and then it moves to beef. Beef is the most expensive meat. There, we see this shift. But this happens all over the world. I think it's very, very income based. The domestic consumption in Brazil is rising also, but with the higher production that you're having, we can supply domestically and we can also supply beef for the world.

William Bland:

Brazil supplying beef for the world, and chicken. But maybe, the picture's a little more complicated than that, which is why you need and will benefit from access to all of our protein prices. Is there anything else that you would like to bring up, gentlemen, or Rafael, before we say goodbye?

Rafael Savoia:

I'd like to add some facts that we have about Brazilian exports. Brazil is exporting specifically beef at a record level this year. The exports have soared over 40% compared to the same period last year. This has been able because Brazil has been able to reach some other markets rather than established markets that we had. That is usually US and China. The export, the volumes for Middle East and Africa are soaring.

William Bland:

Thanks very much, gentlemen, and Rafael, for joining me in this conversation. In conclusion, beef consumption in the US peaked in the 1970s. Since then, Brazil has taken the ascendancy in the production of both beef and chicken, but we will see what happens next. To follow this story head to CI Live, where you will find many of our prices available. We look forward to hearing more from you in this exciting time for our agriculture and food coverage.

This episode was produced by Shikha Singh in Gurgaon. Thank you for listening.