AUSTRALIAN frozen lean beef trimmings exported into the United States for hamburger production or tacos are this week at all-time record levels, just a whisker away from A$10/kg.

The market was quoted on Monday in local currency terms at an historic high of A999.75c/kg, exceeding the previous high set in early August (987.9c) and the short-lived COVID-related spike back in 2019, when US beef packing plants closed briefly due to sickness and absenteeism.

Since the weekly quote was provided on Monday, the A$ has slipped further in currency value, suggesting the market is now squarely in ‘four digits’ for the first time.

When measured in US currency terms, current prices for imported lean trimmings have occasionally been this high before, but when the currency conversion is overlaid, new records have been set.

Prices back around mid-year were around US300c/lb – where they currently sit – but the A$ back then was worth closer to 67c, than +63c, where it sits today.

Herd decline starting to bite

There’s lots of elements to the story behind the latest surge in price for Aussie lean trimmings, but the fundamental driver is the big decline being seen in US non-fed slaughter, as a result of the impact of drought and herd decline.

Fed cattle (ie steers and heifers finished in feedlots) slaughter in the US this year has remained surprisingly high, despite the national beef herd declining to 50-year lows due to drought liquidation.

For the week ending 7 December, total US cattle slaughter was 614,000 head, representing just a 3.8pc year-on-year decline. Fed cattle slaughter was steady at 495,000 head, but crucially, cow/bull slaughter (closer aligned with manufacturing meat) dropped 17pc compared to last year, and 24pc compared to two years ago.

“US packers are struggling to secure sufficient cattle for production despite feedlot inventories matching year-ago levels,” analyst Len Steiner said.

US packer margins continued to deteriorate due to high cattle prices. Tyson Foods’ recent decision to close a meat processing plant reflected broader concerns about tightening US cattle supply supply.

“Further reductions in US cattle processing capacity may be inevitable as packers adjust to projected supply trends over the next three years,” Mr Steiner wrote.

Domestic US cow meat supply

US domestic cow meat supply, which seasonally rises in the fourth quarter, is expected to decline in late (northern hemisphere) winter and spring, Mr Steiner said.

“Cattle producers are focused on preparing for winter and balancing herds against available feed supplies. While some regions have received much-needed rain, more precipitation is necessary. Looking ahead to 2025, the incentive will likely be to retain productive beef cows, reducing culling rates further from 2024 levels,” he said.

“This year saw record-high price spreads between domestic and imported beef. To sustain domestic supply, higher prices for imported beef may be required, potentially narrowing the spreads but maintaining domestic premiums.”

Multiple influences on market

Fuelled in part by a kind A$ currency value in favour of Australian exporters (US63.7c this morning, down more than 3c over the past month), Aussie lean beef trimmings selling at record prices to US customers this week have risen A73c/kg since mid November, and more than 240c/kg higher than this time last year.

However there were a lot of influences in play, a large export trader told Beef Central said this morning.

He pointed out that current pricing for imported lean manufacturing cow beef actually reflected demand in the US market in the February-March period next year – not customer demand this week.

“That’s because of the long shipment times involved for Australian beef – especially since the Panama Canal and Suez Canal issues have emerged,” he said.

“Aussie frozen trimmings leaving in the next few weeks will in fact not arrive until closer to the (northern hemisphere) early spring peak consumption period. If you look at the current US domestic trim market heading into Christmas, it is very flat (as it often is at this time of year, when US consumers are focussed on turkey and ham), but that domestic trim is being used by end-users now – not in six weeks like Australian beef.”

“It means that just now, the domestic US trimmings market is struggling, at the same time that imported trimmings are rising sharply, because of the lag factor.”

“That contrasts with prices only a month or so ago, where the imported trimmings market into the US was a bit flat. That was largely because the market knew all this Brazilian trim was landing in the US in large lumps, in order to go into bond, before clearing after 1 January to avoid the big tariff on Brazilian meat that has applied for most of the year.”

“Everyone knows there’s going to be a huge amount of Brazilian meat in the market from early January, but most people think that volume will dry-up by March, when Brazil is likely to again revert to 26pc tariff for the rest of the 2025 year. That’s when current Australian purchasing will come into play.”

The presence of large volumes of Brazilian beef in US storage meant that at one point the spread between domestic US fresh trimmings and frozen imported got as large as US70c/lb (about A$2.40/kg), when it is normally about 10pc in value, or US30c/lb. That spread has since declined to US40-50c/lb, he said.

Asked what lay ahead next year, a trusted export trade source said he thought come April-May, US fresh trimmings would climb even higher in price as US beef production continues to decline, and Australian imported beef should follow the market up.

“I’m expecting the peak of the trimmings market in the US will be higher in 2025 than it has been in 2024; and the peak in 2026 will be higher again than in 2025,” he said.

“That will be driven by the US beef herd dynamics, when they really start to crunch next year as the herd rebuild commences.”

But the caveat on all that was the impact that could occur from any Donald Trump tariff policy changes, that could destabilise things – and to some extent, on continued strong US beef consumption.

“Regardless of whether Trump applies tariffs on Australian imports, or on Mexican/Canadian product, all would impact US supply and demand next year,” he said.

Part of the changing dynamics in US manufacturing beef has been the growth in Brazilian imports in recent years, despite being hampered by limited tariff-free access. US imports of Brazilian beef this year are around 200,000 tonnes – double what they were last year, and four times the level seen in 2022.

Australia’s exports to the US this year have also surged dramatically, reaching 353,000t to the end of November, up 68pc on last year.

While Brazil is now responsible for a much larger share of US beef imports, there are still large sections of the US market – particularly large food service end-users like McDonald’s and Burger King, that limit imported supplies to Australia and New Zealand only.

Seasonal plant closures

Another factor in current imported trimmings prices being seen in the US is the traditional processor shutdown period in the southern hemisphere (see Beef Central’s earlier story), which occurs not only in Australia, but also in New Zealand and Brazil.

JBS recently announced closures of plants in Brazil, but that is not unusual at this time of year, because they run into wet conditions and unavailability of cattle. On top of that, Brazilian cattle prices have shot up 52pc in the past six months. That has caused the production costs of meat companies like JBS to increase significantly, a recent report said, and their profit margins were severely compressed. The Brazilian companies eventually had to stop production to cope with the difficulties.

Another factor on the radar among US imported beef customers is the possibility of more US East Coast port industrial action. The ports closed for a fortnight over a wages claim earlier this year, and similar action may occur early in 2025 over the introduction of more automation at the major east coast ports.

This is causing some customers to seek to stockpile supplies to overcome any delays that may occur.

In other export destinations for Australian beef, beef prices now rising from four-year lows in China, suggesting more beef is likely to be diverted away from the US market, which is also likely to support prices in the US for imported grinding meat, a trade source said this week.

Other factors that could emerge from a Trump tariff war could be greatly reduced US pork exports into Mexico. Currently the US sells about 30pc of its entire pork production to Mexican customers. If that was to stop, pork would get extremely cheap in the US, which could impact local demand for beef, a trade source said.