Sharp turnaround in US imported beef prices

Jon Condon, 11/03/2016

patties-beef-copyIN A poor week for the manufacturing beef trade to the US, virtually all the price gains made over the previous month have been lost, with imported lean beef values moving sharply lower, MLA reports.

The imported 90CL cow beef indicator dropped 8US¢, to 196US¢/lb CIF, this week (in A$ terms, down 37¢, to 580.7¢/kg CIF), while 95CL bull meat and 90CL shank meat also recorded large falls. Fattier trimmings were not quoted this week.

Reasons for the turnaround in performance are suggested in the Steiner Consulting Group’s weekly report, including a large spike in US domestic 50CL beef trimmings, which make up a significant portion of the ground beef formulation (the mix of lean and fat trimmings to get the desired mix for ground beef or burgers).

This could be a short-term phenomenon however, and stabilise after Easter, Steiner suggested. In addition, the availability of cow beef from New Zealand appears to be starting to increase, a few weeks after a slowdown in bull meat. This tends to occur in autumn each year, and low dairy prices suggest another relatively large cow cull year.

Following the large volumes seen in 2015, US beef imports that have cleared customs as at 8 March were just 2pc lower than the same time last year. The difference is in the composition of imports. Australia is still the largest source of beef imported into the US, but volumes are 14pc lower than this time last year, while NZ shipments have jumped 22pc, and are ahead of Canadian product.

Imported versus domestic pricing big issue

Experienced meat trader Stewart Hanna, from Sanger Australia, puts the sharp correction down to two things: the recent Australian dollar movement (see yesterday’s report) and the downturn in the US market.

“Combine the 5pc uptick in the A$, and the 2-3pc down-tick in the market, and it adds up to those 30-40c/kg falls that have been witnessed over the past ten days,” Mr Hanna said.

“The market was in fact starting to come off a bit the previous week, but was not widely reported. That’s just a matter of timing.”

Mr Hanna said a big issue at the moment was that this time last year, as much as the market may not have been ‘great’, Australian imported grinding beef was still trading at a 50-70c/lb differential below domestic US 90s.

“What that gave us was upside,” he said. “It provided a strong incentive for customers to continue to buy imported product, because it represented relatively good value.”

Sanger Australia senior meat trader, Stuart Hanna

Sanger Australia senior meat trader, Stuart Hanna

“What we don’t have this year is that price gap: Australian imported 90s is trading at parity – even a premium – over domestic lean meat. While ever that happens, buyers are tempted to just put fresh domestic US beef through their system, rather than imported.”

“There is no appetite for buyers to have imported stocks in their inventory, and that’s what Australia is struggling with at the moment.”

Mr Hanna said the reason why Australian imported and domestic US fresh lean were so close in price at present was because the US herd was recovering, and domestic US cow and bull cull were returning to normal.

“The US is saying latest fed cattle numbers are back a little bit. While that’s probably right, there is still a fair bit of meat there. The other influence is that New Zealand’s cow cull is looming, and could be quite substantial over the next 6-10 weeks.”

“That’s linked to the world dairy commodity prices, and while ever it is there, NZ is likely to have a half-decent cow kill.”

Another aspect that looms as a limiting factor on the market is wariness about retail spend over the northern hemisphere summer.

“Summer season us usually America’s peak time for retail sales, but there have been a lot of people (grinders) stung over the past couple of years who have put all of their patties in a box for a supermarket, and found at the end of summer that there was still a lot of them sitting there. Customers are a lot more hand-to-mouth now, so far as that sort of thing goes.”

The big burger grinders for the large burger restaurant chains are trying to go a little bit easy, for the same reasons.”

Mr Hanna said the other big factor was competing proteins.

“Look at yellow sheet, and it’s evident that pork is just sooo cheap, relative to beef. It’s that other protein story. Lean pork is often one third of the price of equivalent beef at present.”

“The dumb maths on protein in the US is that consumers still want to eat beef. But if you’re a retailer or fast food joint and you can get more margin out of pork or chicken, you’ll promote it.”




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  1. Stephen Jack, 17/03/2016

    Don’t count on the large seasonal dairy cow kill here in NZ, farmers have been moving surplus cows to slaughter all summer, keeping plantsbusy.
    Relative to previous seasons the cow kill looks like being quite flat.

    Appreciate your NZ contribution, Stephen. Editor

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