Export trade performance is being impacted at present by US demand for Australian imported manufacturing meat described this week as ‘sluggish’ by the trade.
The trend comes in the wake of a glut of US domestic pork, potentially made worse by US President Donald Trump’s tariff wars with customer countries (see today’s separate report).
Concerns have also been expressed this week in the Wall Street Journal and other media about build-up of meat proteins in cold storage in the US.
Third-quarter US chicken supply in cold storage is forecast to climb 10-15pc higher over the June figure, which would be a new record high for US frozen chicken inventory. Pork inventory saw a stable figure in June despite dramatic production growth, while beef stocks held in cold storage climbed 8pc from the same period last year.
One trader said large cold storage stocks for red and white meats were nothing out of the ordinary in the US, however, but had come into focus now that there was a trade war in play.
The traderquoted Australian 90CL beef into the US this morning as ‘softer,’ at around A550c/kg FOB, or the equivalent of around 570c/kg CIF, depending on delivery east or west coast.
He said the ‘enormous’ amount of beef production coming out of the US at present was the main handbrake on imported lean manufacturing beef pricing – not cold storage stocks of either beef, or competing proteins.
A US 15-20c/lb price differential currently exists between domestic US and imported beef supply, because the abundance of USDA Choice and Select grade knuckles and other lean primals in the US at present is apparently going into the grind, providing a local source of lean grinding beef in direct competition with Australian supply.
Faced with an abundance of pork in the US at present, retail prices are already startlingly low, and likely to head lower, it seems. That does not auger well for beef prices, in a competitive US retail landscape where consumers can easily substitute one protein for another.
Prominent Sydney retailer Stephen Kelly did some sums this week on US retail pork prices, where major US retailer Costco is selling pork loin for the equivalent of $4.40/kg Australian, and pork tenderloin (fillet) for A$8.90/kg. Comparable supermarket prices in Australia were $15/kg and $32/kg respectively for the two cuts, he said, via social media.
Processor grids show little or no change this week, following a period of upwards movements since the start of July. Competitive grids this morning for kills in late July in southeast Queensland had four-tooth grassfed steer at 500c/kg, milk and two-tooth steer 505c/kg, and heavy cow 445c/kg. Other local grids for plants with cheaper transport access are around 430c/kg on heavy cows and 480c on grassfed ox.
Across the border a large northern NSW export processor has grids out today for slaughter week commencing 13 August of four-tooth grassfed heavy steer of 490c/kg, and heavy cows at 430c/kg.
Queensland processors said they were reasonably well covered for kills through to early August, largely due to the flow of cattle forced by incessant dry conditions.
NLRS reported a 2pc rise in slaughter activity last week, with 145,094 head processed across the five eastern states to Friday. That figure was up 2pc on the week before.
Female kill in NSW continues to climb deeply into liquidation territory, accounting for almost 58pc of all adult cattle slaughter in the state last week. Reflecting generally better seasonal conditions, Queensland’s female proportion was just above 46pc, the widely-regarded trigger point above which female number are said to be in decline.
Queensland’s kill last week reached 78,741 head, up 1pc on the week before, but 13pc below where it sat this time last year.
With substantial parts of NSW now recording their lowest rainfall year-to-date in 116 years, the NSW kill remained high at 34,109 head, but the figure was down 9pc from the previous week’s recent high. Victoria accounted for 22,772 head last week, unchanged from the week before, while South Australia’s kill was up 2pc at 4614 head. Tasmania’s kill was unchanged at 4858 head.