Beef and sheep prices - which policy framework conditions have the highest impact?

This was one of the questions answered during this year’s Beef and Sheep Conference. The session considered important events in the last years in policy framework with the most significant economic impact on beef and sheep farming. Here are selected results for some countries:

In EU-countries the top issue is the EU-CAP reform and its national implementation. The conversion of the single farm payment into a basic payment scheme with a greening component will lead to losses of direct payments per ha for beef finishers with high stocking rates in most European countries except UK and Germany. In some – particularly affected – countries like Italy coupled payments were re-introduced to compensate for these losses. On the other hand, grassland farms are favoured through second pillar measures (agri-environmental measures). 

To overcome degradation and desertification in China, there are environmental regulations which lead to destocking in grassland areas. This has major negative impacts on farm income. On the other hand, governmental subsidies for local farmers established cooperative farms in grassland areas. 

A combination of a weakening Australian dollar, lower interest rates and high cattle prices in the US have led to higher beef prices in Australia. The strong import demand for Australian beef in the US, China, South East Asia, and the Middle East also supports this development.

In South Africa, legislation imposed year-to-year increases of minimum wages which have led to significantly higher on-farm labour costs. The now required productivity increases to compensate for the risen wages have not yet taken place.

Another labour related issue can be found in Canada. There is a lack of labour in beef packing plants through changes in the temporary labour regulation. Thus plants run below full capacity and more Canadian cattle are being shipped to the US for slaughter.

The export market in Argentina is hindered by political trade regulations like export taxes and other export barriers for beef. Even direct retentions (or sometimes export bans) are in place to keep the price on the local market low. Furthermore domestic recession is caused by inflation, followed by increases on production costs and thus lowering the competitiveness of the country. However, on the product side, this trend is partially compensated by ongoing devaluation of the AR-Peso against the US-Dollar.

Further results of the session are presented in the Beef and Sheep Report 2015, which can be ordered here:

Beef and Sheep Report 2015