Farmgate beef prices are finally gathering some momentum. The return of procurement competition has partly influenced this upside as slaughter-ready supplies have slumped.
High slaughter rates developed in late summer and stretched right through autumn. The ability to turn on capacity as needed resulted in national kill rates varying between 78,000-80,000 head per week for five weeks between April and May. Despite this, reports during early May indicated processors could have handled more cattle, especially cull cows.
AgriHQ data shows farmgate prices lifted for all classes of cattle through May, even though slaughter rates tracked higher than the five-year average.
The hunt for cattle has intensified in the weeks since, with prices following suit. While procurement might be influencing some of this recent upside, the intensity wouldn’t be there if there wasn’t strong support from our export markets.
When we spread the net wider, we can see that the real driver to market gains since January has been increasing export returns in our largest beef market – the United States.
The US market continues to go from strength to strength. Imported beef prices have lifted by 34-41USc/lb on average since the start of the year to be sitting well ahead of the five-year average for June.
Whereas US imported beef prices were falling this time last year, there is currently a resurgence in buying. NZ exporters are expecting further pricing upside as our export volumes tighten into winter.
Reduced US domestic beef supplies and solid consumer demand have been driving the US beef market higher. Fed cattle supplies are set to reduce, but weekly cow slaughter rates have already slumped, pushing domestic 90CL cow prices to sit above US$3.50/lb. Over the past 10 years, this indicator has only pushed over US$3/lb a handful of times. However this year, it’s maintained a plus US$3/lb level since early February. This highlights the strength of beef demand within the US, and its ability to withstand the high cost of living while trumping other meats competing for consumers’ attention.
To take advantage of the strong US market, total NZ beef exports there have climbed by over 20,000 tonnes to 129,000t this season. That additional beef has come at the expense of exports to China, which have fallen by 19,000t.
This has been achieved by reducing the volume of manufacturing beef and frozen boneless cuts to China, the latter which has butted heads with cheaper Brazilian cuts. As a result of these changing trading dynamics, the US and China now equally account for 70% of NZ beef trade (based on volume) this season.
As you would expect, other beef exporting countries desperately want a slice of the action within the US and have therefore ramped up exports to gain that advantage. Recent industry reports indicate the US hasn’t seen these sort of import volumes for nearly a decade. Yet this has failed to dampen import prices. In the past five months, at 126,000t, Australia has shipped almost double the volume to the US compared to the same period in 2023. On top of that Brazil seems intent on supplying a steady stream of beef to the US, despite now incurring hefty tariff charges.
The supply side of the equation within the US appears one-sided but fortunately the market is transversing a heavy demand period. History would suggest that US import prices will continue to edge higher to spring, given their falling beef supplies.
This would cement a strong pricing result for those with finished cattle in spring. AgriHQ’s latest Livestock Outlook backs this up with forecasts pointing to spring prices lifting above last year and the five-year average.
This article was written by AgriHQ analyst Mel Croad. Mel reports provide key insights into what makes our sheep and beef markets tick. Subscribe to AgriHQ reports here.
