Thursday, August 18, 2022

Promising outlook for beef

File photo

Farm gate prices for beef have traded in a tight band for a few months now. 

In recent weeks there have been a few cents added as processing premiums become a little more visible. 

In the five weeks to early June, printed kill stats show New Zealand processed 357,000 cattle, which was 11,000 head lower than May 2020 when processors were still grappling with restricted processing ability due to covid lockdowns and social distancing. 

However, it was far from plain sailing for processors this May, due to continuous staffing issues plaguing processing plants.

The slight uptick in farm gate prices does suggest the flow of stock is slowing. 

At the same time, many plants are winding back capacity to winter levels to enable plant maintenance or switching production to bobby processing. Current beef prices are for bull and prime in the North Island are 45-50c/kg above this time last year. 

In the South Island the difference stretches out to 75-80c/kg ahead of last year. 

Solid export markets are keeping prices at record levels for this time of the season. 

Average export values for NZ beef in May hit $10.43/kg, climbing 43c/kg on April returns. 

This compares with $7.83/kg for May 2021. 

Usually, May export values can dip on the sheer volume we typically export and the higher volume of lower priced manufacturing cuts dominating the export mix. 

But this was not the case this year with average export values hitting a record high. 

While the weaker NZD will have certainly had some influence on export returns, key markets such as China, the US, Japan and Korea also underpinned this lift in values.

It’s interesting that the US has remained a key influencer of market value for beef. 

There have been very unsettled market dynamics emerging there in recent months. 

US imported beef prices, especially for the leaner 95CL bull meat, have slipped over the last six weeks. 

Values now are US15c/lb lower than last year at US$2.75/lb. 

Imported 90CL cow meat has also been caught up in this downside, falling over the last month to land at similar levels to 95CL bull meat. 

It is unusual that US imported beef prices are under pressure at this time of the year. 

However, its simply a reflection of the surging US cow kill increasing domestic supplies and a hangover of extraordinary volumes of cheaper Brazilian beef that has swamped the market. 

This has dampened demand and pricing for any extra imported supplies.

As our domestic supplies slow, it should allow shipping space to free up. 

This would enable a return of more consistent flow of beef into key Asian markets. 

Prices there have been trading at a premium to what can be achieved in the US. 

This will bode well for beef prices through to spring/early summer. 

Also encouraging are reports of the US cow kill eventually slowing later this year. 

This combined with a spike in fed cattle supplies at the same time, means a likely return to increased demand for imported beef.

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

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