BEEF | Meat company margins tighten for cattle

Last week 300kg steer were in the $4.20-$4.25/kg range in the North Island and up to $4.30/kg. South Island prices are also beginning to lift with 300kg steers at $3.85/kg this week. But procurement competition is less pronounced in the south with the cattle kill still running at high levels. While the dollar is lower than it has been, US imported beef prices continue to struggle which is putting more pressure on meat company margins. This is likely to limit the upside for farmgate prices in the short-term. The margin between 95CL bull prices and the farmgate price is now $1.29/kg which is 15% lower than 4 weeks ago and 10% lower than the 5yr average for this time. But farmgate prices in the South Island are likely to close the gap on their North Island counterparts in coming weeks as cattle kill rates diminish.

US cow kill may keep pressure on market

Summer is not far around the corner in the US and while rain has fallen in many areas, the regions of importance to the beef industry remain in severe drought. According to Denver's Livestock Marketing Centre, 45% of the US beef cow herd currently resides in states with 40% or more of their pastures rated as poor or very poor compared to just 6% last year. Meyer and Steiner believe this has the potential to pressure the grinding market further as there is every likelihood more cows will be forced out for kill as many have been holding on for the spring rains which have not eventuated. There are also high numbers of heifers being held for beef cow replacements and these also seem destined for kill as options are limited under the parched conditions.