Value of grinding beef into US at all-time high

The best cows and calves in Oklahoma in the United States sold to $7152 in Australian dollars. It puts a sobering perspective on Australian returns for cattle. Here’s a look at the issues.

90 chemical lean beef into the US is at record levels.

The record cattle market in the United States is still the beating heart of the strong global beef industry which is benefitting Australia in terms of tonnages of meat sold at higher prices.

The graph on this page shows the rising price trajectory of cow beef sold into the US, with the market continuing to push higher into record territory as the US grapples with shrinking kills from a smaller cattle herd.

In US currency terms the value of 90 chemical lean grinding been shipped into the US is at its highest point ever. When converted into Australian dollars the value of cow beef is just slightly off the all time high set earlier in the year due to currency fluctuations.

The current value of 90CL cow beef to the US in Australian dollars is around 1060c/kg, just behind the peak set in February of 1080c/kg. But many pundits believe it will be broken soon if the US continues to record lower weekly cattle kills like it has been.

According to the US Department of Agriculture, the daily cattle kill has started July trending 6 per cent lower than a year ago, which over a week’s kill period adds up to a significant drop in production for the American beef sector.

As a result the US has been drawing in extra volumes of meat from other countries, driving up prices and demand pressure on other volume international markets like China, Japan and Korea.

The two largest markets by volume for Australian beef during June was the US which purchased 35,343 tonnes of beef (the bulk of this or nearly 26,000 tonnes being frozen beef), followed by China at 27,037 tonnes (of which nearly 22,000 tonnes was frozen).

Most frozen beef is manufacturing grade or cow beef used in hamburger blends.

Australian farmers are yet to see the full benefit of the global demand for cow beef even though saleyard prices have started to rally, particularly in the south following some winter rain.

Heavy beef cows sold to 371c/kg liveweight in early trading this week, with Victoria having the highest cow price average of 322c/kg against Queensland at an average of 283c/kg.

The continued flow of cows out of northern regions is keeping a cap on more dramatic price movements for cows at saleyards, with southern processors active at Queensland markets and using these numbers to offset the drop in supply at Victorian selling centres.

The cattle draw for the Roma cattle sale in Queensland on Tuesday was 8737 head, according to TopEx. Included in this number was 1700 cows, and The Weekly Times understands major Victorian meatworks including Midfields at Warrnambool have sent buyers north again for this market.

Cattle transporters have also told The Weekly Times that while there has been a lot of media publicity about the number of young cattle being sold north into Queensland and northern NSW to restockers, the amount of animals now being trucked south for processing was going under the radar.

In theory – with the price for manufacturing beef so high into the US (refer to graph again) – heavy beef cows in Australia should be capable of hitting 400c/kg liveweight, based on historical trends comparing US meat values to Australian saleyard indicators.

It is mind-blowing to convert the money cattle are making in the US into Australian equivalents. In its latest market report for Oklahoma the USDA listed good framed joined T2 cows (in their second trimester of pregnancy at four to six months) as selling to US$3500 and averaging US$2580 over a run of 98 head which weighed an average 1165 pounds. Convert this to Australian terms and the cows weighed 528kg and sold to $5383 and averaged $3968.

The best cow and calf outfits in Oklahoma sold to US$4650, which equals $7152 in Australian dollars, based on current dollar conversion rates.

It puts a sobering perspective on Australian returns for cattle.

And on the issue of sobering, or perhaps disappointing, is the money high quality grain-fed trade cattle have been making.

With cows and crossbred manufacturing steers off grass at up at 370c/kg, returns of 400c/kg to 450c/kg for most of the lead pens of grain-fed trade Euro steers and heifers doesn’t look enough for the work and cost involved (yes there has been some sales as high as 480c/kg in the past fortnight but on limited sales of just a few individual animals).

It is something that has been commented on by auctioneers, some privately rating the trade cattle market as “somewhat disappointing” in its inability to garner much traction this winter, particularly as grain-fed lambs sell to record levels.

Meat buyers said it reflected poor demand and slow sales domestically for beef, compared to strong demand for export grade product. It comes back to grinding beef and the US market being the backbone of the cattle market at present.