Friday, December 8, 2023

NZ can bless the rains down in America

Avatar photo
Stratospheric cow slaughter tallies have essentially clogged US beef supply for a while, but the drought there has broken – and that’s good news for bull farmers in New Zealand.
The current dynamics in the United States beef market spell good news for New Zealand bull farmers. Photo: Natwick
Reading Time: 3 minutes

The news from exporters continues to be positive for bull farmers. 

The United States market for manufacturing beef fell away noticeably in the fourth quarter of last year, but has been on an upwards trajectory since, really gaining pace since the start of February.

Prices for the US’s own lean grinding beef have lifted US24c/lb since mid-December, and the imported market that New Zealand trades on has jumped by a similar margin. Once you factor in the better exchange rate, imported 95CL bull meat is paying around NZ$1.70/kg more than at that low point in December, and imported 90CL cow meat is up $1.10kg since then.  

The main driver here is the US cow kill, or rather what it’s expected to do over the coming months. 

Much of the US experienced severe drought for an extended period over the past year or two. 

With beef breeders having to reduce numbers to manage feed, that sent the cow kill through the roof. 

In the year to late-January, cow slaughter tallies were the highest since at least 2006. 

Therefore US traders have been flush with their own supplies of lean grinding beef.

However, overseas analysts are picking a swift change of tune in these supplies. 

Other than a pocket of land around Kansas, the worst of the drought has essentially broken. And with weather forecasters picking a switch from La Niña to El Niño, conditions should, in theory, continue to improve as the year progresses, pushing the industry into “herd rebuild” mode. 

US buyers are aware of this and are willing to pay more to secure extra product now, on the assumption that they could battle to find their required volumes late in the year as the cow kill really starts to tank.

The last big US drought was back in 2012 and early-2013, and was followed by a massive drop-off in the cow kill, which in turn sent imported grinding beef prices skywards in 2014 and 2015.

And the re-emergence of China has added a bit more urgency to this activity for those that look to NZ and Australia for product. 

China was taking a reasonable volume in the last few months of last year, but orders and prices paid have kicked up a gear since the nation has come back from the Chinese New Year break. 

They will likely be even more active over the next few weeks, given Brazil is temporarily unable to supply China with beef after detecting an atypical mad cow disease case.

Imported 95CL bull meat prices have jumped more than other cuts under the manufacturing beef banner, but this can be blamed on NZ’s slow bull kill. 

The bulk of cattle classes in NZ were killed at around normal levels in December and January, but bull throughput was the lowest in nine years, 13% less than last year.

There are a few factors working against NZ exporters, though. 

For one, the Australian beef kill is set to lift this year now they’re a few years into post-drought herd rebuilding. 

That’ll especially mean more cows hitting the slaughter system considering few have been culled since the start of the pandemic.

The other is alternative proteins. The US chicken and pork industries are running at full blast again, sending prices for these meats down. 

US inventories of chicken and pork were up 12% and 19% on last year at the end of January. 

Eventually this will flow down to retail pricing and ultimately lead to consumers buying more of these meats in place of beef, especially as inflation means consumers are tightening their belts.

This article was written by AgriHQ analyst Reece Brick. Reece’s reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.

People are also reading