Australian beef might be flavour of the month

It’s been a tough few months for the beef industry as cattle prices fall, but new global statistics are showing promising signs.

Signs of less US beef on the world market is good news for Australian farmers, as are fresh reports of dearer prices for grain-fed cattle in the US.

However, hidden among all the information is some concerning data referencing consumer demand and how the US meat market may play out differently than expected.

The latest available export data shows a shift in volume from the US to Australia, reflective of our larger cattle kills post the drought era versus the US, which is just starting to recover from an extended and severe dry period.

The following is an export ranking for February calculated by US meat market analysts, the Steiner Group. The figures for beef sales from the major international players were:

•Brazil: 20 per cent of global trading, selling 126,450 tonnes, but down 21 per cent or 32,654 tonnes on the previous February;

•US: 14 per cent of trade at 77,238 tonnes, down by 16,269 tonnes or 17 per cent less;

•Australia: 11 per cent of trade at 70,739 tonnes, up by 10,866 tonnes for a sales increase of 18 per cent on last year;

•Argentina: 6 per cent of trade at 51,504 tonnes, down 2,915 tonnes or 5 per cent less; and

•New Zealand: 5.5 per cent of trade at 42,591 tonnes, down 1,643 tonnes or 4 per cent less.

It suggests supply pressure from US beef is starting to ease, although they have been holding their ground into high-value markets such as Japan, South Korea and the European Union.

Australia has gained sales in China, which continued to ramp up in March thanks partly to the atypical case of BSE detected in Brazil, which temporarily suspended its big trade with the Chinese.

Overall, less beef on the world stage from the US and South America is a positive for Australian exporters in terms of supply.

Although an interesting part of the data released by the US Meat Export Federation (USMEF) is pricing.

For the first two month of this year, the value of beef exports out of the US has dropped 24 per cent compared to January and February 2022, according to the USMEF. It also calculates export returns to a per head price for the number of fed cattle slaughtered.

The USMEF said beef export value per fed animal worked out at $US360 per head for the period January and February, back from a calculation of $US446 in 2022.

It may seem cold comfort, but when you consider the general retreat in US beef values, the fall on the Australian livestock market is within similar percentage values.

There could be some upside in cattle prices for producers if the US supply continues to falter.

For example the current saleyard indicator for heavy slaughter steers is listed at 321c/kg liveweight, back about 30 per cent on year ago levels. On a simple level it is 6 per cent harsher fall than the overall 24 per cent drop in the US beef export value.

But what also needs to be noted is Australian cattle prices had been sitting high against competitors.

Basically the take home message is that beef values on the world stage are at significantly lower levels than a year ago.

However, a recent rally in US cattle prices could prove helpful in lifting beef values as the US trade plays a significant role in setting the market tone on the world stage.

In the past fortnight fed cattle prices have lifted by more than 10 per cent as US ‘packers’ fight for a share of the tighter pool of grain-fed animals in the lead up to Memorial Day in the US – the biggest beef eating weekend for the year, according to Len Steiner. On the calendar Memorial Day is the last Monday of May.

Commenting on the market last week he said “it has proved to be an explosive situation and wholesale beef prices have jumped 4 per cent from the previous week and are now 11 per cent higher than a year ago’’.

But he noted there was also an odd thing happening, where imported grinding beef prices were not moving upward in tandem. It is an unusual situation he linked to uncertainty around consumer demand and how the US economy will hold up.

“Even as wholesale beef prices have seen a sharp increase in the last two weeks, the price of lean grinding beef has been relatively steady,’’ Mr Steiner said.

“For some market participants that’s not a good sign, especially considering that cow slaughter has been limited. If you can’t get the 90CL market to rally now, how much price upside should traders expect in June and July.’’

This was keeping a cap on prices for Australian cow beef being sent to the US, as allowing for shipping time, US buyers don’t want to commit to higher prices with mixed signals for the American summer beef market.