BEEF UPDATES | US droughts will impact beef industry

Not that long ago, the USDA was predicting a record corn crop but the drought has changed prospects dramatically. Feed costs have soared which will not only drive beef prices higher, but give US farmers less incentive to rebuild cattle herds. Farmers are forced to offload stock onto feedlots earlier than expected, or slaughter as pasture conditions deteriorate. US beef production this year is expected to be higher because of this, however the long term effect is further deterioration of the ever shrinking US beef herd. This bodes well for NZ beef industry, as there will be a greater reliance on US beef imports.

US beef imports set to rise

The US is expecting to import 1.12m tonnes of beef this year which as an increase of 20% from last year. 2013 imports are expected to be higher again at 1.18m tonnes, up a further 6%. As a contrast, US beef production is set to fall 4% this year and drop another 2% next year. Exports have been very high over the past few years as US exporters have taken advantage of a weaker US$, but next year they're expected to fall 2%.

US imported beef market firm

All the cards are up in the air on to which way the US imported beef market will swing in the coming weeks. At the moment, US imported beef prices are firming slightly on very limited trades, especially seeing the US is in holiday mode after Independence Day a fortnight ago. The droughts in the US will buoy US domestic supply in the short term, but with the NZ bull kill halving last week, NZ exporters will be less inclined to accept lower bids. Hopefully over the next few weeks there will be a clearer indication.

Female cattle in demand in Australia

The store market in NSW, Australia, has already responded to the US droughts. There has been a lift in demand for female cattle as producers have taken herd rebuilding a notch higher. Australia has already made progress rebuilding with the national cattle herd estimated to increase 5% to 30.2m head in 2011-12 (ABARES). This trend is set to continue with growth expected to be up a further 4% next season to 31.4m head.