Prices to beef exporters consigning grinding meat to the US surged to three-year highs last week when measured in A$ terms, as growing US demand and the currency effect combined to improve outcomes.
As Beef Central’s home-page graph (reproduced here) shows, 90CL imported beef price to the US last week reached A428.8c/kg.
That’s the highest figure seen in at least three and a half years (Beef Central’s records go back only to January 2010), and represents a 7.6pc jump in value in the past three weeks, and a 12pc jump on the recent low-point seen seven weeks ago (383.4c/kg).
The rise almost exactly plots the recent trajectory of the A$/US$ value, also published here, which has eased 13.8pc in the past three months, hitting a three-year low of 89.42c on Friday.
In US currency terms, the improvement in imported 90CL price has been nowhere near as large, lifting only 3.6pc in the past three weeks, and 5.6pc over the same seven-week passage mentioned above. That suggests the price rise is being driven much more by currency than the moderate increase in demand.
One export beef trader spoken to on Friday said as US demand had grown recently, the ‘share’ of the recent A$ currency adjustment had swung back more in Australia’s favour. Earlier, when high Australian production was getting ahead of US 90CL demand, US importers were demanding, and getting, a higher share of the currency movement advantage.
In its weekly imported beef report, Steiner Consulting said imported lean grinding beef prices were modestly higher last week (in US$ terms) on limited offerings from Australian packers, seasonal decline and very limited offerings from New Zealand, and minimal supplies coming from Uruguay and Central America.
Market participants appeared to be split in their assessment of market conditions, Steiner said.
Some indicated business was relatively slow, with end-users looking for product for immediate delivery but with little interest for forward bookings. Others indicated that ground beef business had improved and foodservice sales were notably better than in the (northern hemisphere) spring.
“One issue for lean grinding beef demand remains the very tight supply of domestic 50CL boneless beef trimmings. Some market participants were likely caught leaning the wrong way, as the expectation was for fat beef trim to be seasonally lower in July and August,” Steiner said.
So far prices for fat trimmings have moved counter-seasonally higher.
Some of the possible explanations put forward for the continuing high price for fat beef trimmings (sourced almost entirely from US fed cattle), include tight fed steer supplies, limited inventories, and limited supplies trading in the negotiated pool.
Another development that may also have influenced the price of US 50CL domestic beef was the surge in US shipments to Japan of grainfed beef short-plate. This was likely to have reduced the supply of 50CL beef coming onto the US domestic market, Steiner said.
“Overall, however, pricing for lean grinding beef appears to be in better shape than it was a few weeks ago,” last week’s report said.
On the US domestic supply side, US cow and bull slaughter is currently hovering at around 130,000 head per week, modestly below year-ago levels.
Improving feed conditions, lower corn prices and higher prices for feeder cattle out-front will likely reduce the number of beef cows coming to market in coming months, Steiner said.
US dairy cow slaughter (an alternate source of lean grinding beef) was also expected to track below year-ago levels in the second half of the year, as milk producers benefit from improving milk/feed ratios.
Overall, only about 10pc of the US beef cow inventory is currently in areas with very poor pasture conditions, while last year 30pc of the beef inventory was in those areas.
“This kind of situation is conducive to, but does not necessarily imply, herd rebuilding,” Steiner said. “It is in part what drives our forecast for a decline in US cow slaughter this (northern hemisphere) autumn.”
More than 50 pc of Australian beef exports now go to markets other than the US and Japan, following a big jump in demand in a number of emerging markets like China and the Middle East.
“This has made Australian beef exports more balanced, and it is likely that higher prices will be required from the US market to ‘buy back’ some of that lost share,” Steiner said.
US beef kill records 2pc decline
Overall US cattle slaughter for the 2012-13 fiscal year was 2pc lower than the year before, MLA reported on Friday. On average, however, cattle were slightly heavier, with net beef production down just 1pc, at 11.7 million tonnes.
The decline in cattle slaughter was recorded across all categories, except dairy cows (3.14 million head), which were turned off at a higher rate in response to high feed costs. Steers and heifers, which are mostly fed cattle, were down 2pc (to 16.05m head) and 4pc (to 9.07m), respectively, also in large part due to high feed costs discouraging feedlots from increasing their stocks.
Beef cow slaughter (3.38m) was down 8pc, mainly due to the decline in the overall US beef cow herd. This drop occurred through July to March, with the April to June quarter up 11pc, as the drought continued into the US summer.