Grinding beef prices into the US falls, while feeder cattle prices drop

The cattle market is under pressure from a number of fronts. Our analysis looks at why grinding beef into the US has slowed and how bigger selling numbers are impacting the market.

The cattle market is under pressure from a number of points.

The cattle market is under multiple pressure points which combined have started to soften price rates being achieved at saleyards.

There are subtle issues at play on all the key market drivers of supply, export demand, season and margins for grain feeding cattle, according to the latest data.

On the supply front there are signs of spring numbers starting to build as the weather warms and grazing conditions start to deteriorate in all but the most reliable feed southern regions.

It shows up in the feeder cattle sector, with reports key buyers are heavily booked with placements for coming weeks and have started to slow competition in the auction system. Not all the regular feedlot orders operated at the Wagga Wagga, NSW, prime market on Monday this week and falls of 25c/kg were reported for heavy feeders over 400kg liveweight which dropped back to an average of 345c/kg liveweight.

Southern feeder cattle have lost the most value, linked to the limited and patchy rainfall Victoria recorded this year which has led to a reduced grazing window and has producers selling stock that are up to buyer specifications.

It shows up in a breakdown of prices by state, according to National Livestock Reporting Service auction data. The Victorian rate has dropped from an average of 365c/kg in early August to 330c/kg now, while over the same time period the Queensland rate has actually improved from 344c/kg to an average of 353c/kg this week.

Questions are also being asked about feedlot margins for cattle at present due to price trend lines for feeder steers and feed grain prices converging. An analysis by Meat and Livestock Australia market analyst Emily Tan looked at market behaviours for grain and feeder cattle during the past five years.

The interesting points were that in 2021-22 when cattle prices hit record levels and heavy feeder steers trended above 550c/kg , the feed grain price for wheat on the Darling Downs of Queensland was $300 tonne.

Move forward to 2023 when the wheat price was high at $450 a tonne, the feeder steer price had collapsed to less than 250c/kg. The take home from these scenarios is the feedlot industry benefits from being able to capitalise on either cheap grain or cheap cattle prices to carve out a margin.

At the moment the two price trends are aligned with feeder steers at an average of 350c/kg and wheat at $330 a tonne on the Darling Downs, meaning there is little gap between these major input costs. When graphed the figures are as tight as the industry has seen in five years.

Which leads onto some issues on the export beef front.

The United States grinding beef market, which has led the world to higher values and soaked up a mass amount of product from both Australia and other countries, has started to slow.

Price rates for grinding beef derived from US slaughter cattle have been recording slow falls in recent weeks, the latest results for the first week of October showing another 2-8 per cent correction.

The 90CL cow price into US against saleyard average for cows.

While imported grinding beef values have been trending at a discount to US product, prices are still being affected, albeit modestly.

The graphic on this page shows the latest trend line for 90 chemical lean (90 per cent red meat 10 per cent fat blend) cow beef being exported from Australia into the US. After hitting a peak of 987c/kg shipped to the US in August, the price has slipped back to 916c/kg this month.

It marks a fall of about 7 per cent. The average saleyard price has followed it down from a high of 292c/kg in August to be trending at 270c/kg liveweight this week.

However the cow market is likely to go lower judging by results out of Wagga Wagga and Mortlake on Monday this week where some grades were up to 25c/kg cheaper. If spring rain remains scarce and patchy in the lead up to summer the cow market could experience extra pressure from a sell-off of females from feed and water issues.

But the longer-term fundamentals of the US grinding beef market remain solid, and imported grinding beef should receive some support from the fact is it much cheaper than home grown US manufacturing meat.

Steiner Consulting ran the price figures and come up with a difference of 13 per cent in favour of a US based company using pure US meat for a 75 per cent blend of meat and fat ‘block’ compared to mixing in a maximum amount of imported Australian product.

The company said it was a significant saving which would be utilised.

“Imported product is still trading at a big discount to domestic product and those that can use imported beef will look to maximise the inclusion rate in (grinding beef) formulations,” Steiner wrote.