After slipping to a 15-year low last year, Australian exports to the US are again moving in a positive direction, driven by a big emerging hole in US domestic beef supply, softening demand in other grinding beef export destinations like Russia and other factors.
According to the USDA's monthly livestock slaughter report, beef production for the US in September was down nine percent from September last year, while cattle slaughter was down 12 percent over the same timeframe.
Analysts point out, however that the figures were distorted somewhat by fewer killing days across the September monthly cycle this year than last.
The average liveweight for US slaughter cattle in September was up 15kg from the previous year, at 596kg.
Some analysts are predicting Australia’s shipments to the US for October to be as much as 45pc higher than October 2011, as imported beef partly fills the growing domestic production gap. At the same time, Australia’s exports to many other destinations in October look like being lower.
Making a presentation at the recent Meat Importers Council of America conference, analysts Steiner Consulting explored the likely availability of meat protein in the US market next year.
The overall supply of beef, pork and chicken available to US consumers had declined from around 125kg/person in 2007 to an estimated 113kg 2012, Len Steiner told the conference.
That 9.4pc reduction was part of the reason for the surge in US retail meat prices in the last five years.
“Going forward, we see continued declines in per capita meat protein availability, particularly for beef. We currently expect US beef production to fall 3.8pc in 2013, after declining 1.4pc in 2012 and 0.4pc in 2011,” he said.
The higher prices should encourage more imports, particularly from Australia and New Zealand.
Steiner’s working estimate suggested an 8.5pc increase in beef imports next calendar year.
But at the same time, US beef exports are also forecast to modestly increase next year, up 1.5pc versus 2012. That will be driven by larger US exports to Japan, and to a lesser extent Korea, especially after Japan lifts its current age limits on US cattle.
Steiner forecasts a rise in US exports of as much as 30pc (about 50,000t) to Japan and a 6-9pc increase to South Korea. These increases, however, would be more than offset by expected declines in US sales to other markets.
Canada and Mexico are expected to purchase less US beef as high prices ration out some of the demand. Smaller markets will also purchase less US beef.
“However, it is important to keep in mind the net impact. Per capita beef availability in the US market in 2013 is expected to be down 4.1pc from a year ago and a whopping 16pc lower than where it was prior to the recession,” Mr Steiner said.
“We do not think US domestic demand has shifted considerably, although there has been some demand damage due to the high unemployment and slow increase in disposable incomes. Rather, we think that the consumer has moved along the demand curve and has had to pay more for a smaller supply available to them.”
“And that demand curve is not linear. The more supply is reduced, the more significant are the price effects.”
The supply picture in the US could be even more dire in 2013, MICA conference delegates were told. US beef cow numbers are tight and will likely be even tighter by January. US cow/calf operators continue to hope that a turn in weather will lead to an improvement in pasture conditions.
“They simply do not wish to sell cows, as evidenced by the sharp decline in US beef cow slaughter despite some of the worst pasture conditions on record,” Mr Steiner said.
Even given a return to normal weather patterns, there could be a 10-15pc reduction in US cow slaughter during the first half of the 2013 year, particularly in March-June period, he said.
“This time period is critical for US manufacturing beef as demand tends to improve. Also critical for US lean grinding beef will be the lack of Lean Finely Textured Beef. Retailers will be looking for alternatives aggressively. This will mean some US cuts, like rounds, will end up in the grinder.”
The problem is that those cuts will come from cattle priced at record high levels.
Australian shipments up 45pc
Beef imports from Australia are currently up 52,000t, or 45pc compared to the comparable period a year ago.
“Based on the pace of Australian shipments so far, we expect entries of Australian beef to remain well above year-ago levels for the next two months as well. Our estimate is for October exports to the US (beef arriving in the US 3-4 weeks later) to be around 18,000t, some 47pc higher than a year ago,” Mr Steiner said.
While the high price of lean grinding beef in the US is one reason for the surge in Australian shipments, also important is the fact that that beef supplies in Australia have improved somewhat compared to last year when producers were in full-blown herd rebuilding mode.
Demand for Australian beef in some other key markets has also declined this year. Shipments to Japan have slowed down considerably, being back 20pc in September and likely a similar amount in October. Similarly exports to Korea are down 21pc for the year and shipments to Russia are about half of what they were last year.
With Brazilian plants once again approved to ship product to Russia, and thanks to the depreciation of the Brazilian real versus the Russian rouble, Brazil has once again become the primary beef supplier to the Russian market.
“The US market should become much more competitive as a buyer in 2013,” Mr Steiner said.
“It will have to be, in order to fill the supply hole created by the US cow liquidation of the past three years. The surge in Australian beef shipments has helped ameliorate the situation, although it as not fixed the lean beef shortage.”
While US imports of Australian beef have been strong this year, imports from Canada have declined sharply. Canada domestic beef supplies are notably lower, with steer and heifer slaughter down 5pc for the year and cow slaughter down 12pc.
There could also be a slowdown in imports to the US from Mexico next year.
“In part this is because the volumes have become large enough that the current growth rate is not sustainable given the Mexican supply base. Imports from Canada will be steady to lower and growth in imports from other markets will be limited due to the quota constraints,” Mr Steiner said.