Dollar crippling beef slaughter prices

Currently the NZ dollar is hovering around 82c against the US dollar which is a approximately 5% higher than the same time last year. So despite a 10% hike in imported 95CL beef prices compared to the same time last year, in NZ dollar terms returns are only 3% higher. All else being equal, the stronger position of the NZ dollar has slashed over 25c/kg from beef prices compared to a year ago.

More bobbies head to slaughter

The bobby calf kill has already reached its peak with numbers now tapering off as the season progresses. This year 1.53 million bobby calves were sent for slaughter from July to Oct 1 which is an increase of 5% (or 74,000 head) on the same period last year and an incredible 15% hike (or 199,000 head) on 5yr average levels for that period. Much of the increase can be attributed to the ever expanding NZ dairy herd which has increased an estimated 7.6% since 2010 (or 455,000 head). There is also still a lack of rearers despite an increase in those willing to have a go this year with many still gun-shy from the poor returns a few years ago and unwilling to step back into the fray. The NAIT scheme is now up and running and this has also contributed to the slaughter tally as some farmers don't want to go to the trouble of tagging so are choosing to offload instead.

Tainted beef an issue in Canada

The largest beef recall in history is currently underway in Canada as the result of an E. coli contamination. Upward of 1.5 million pounds of beef is being recalled after faecal matter slipped through the detection process at an XL Foods plant in Brooks and made it onto store shelves. XL products are found in almost every major grocery chain in Canada and about half its product is sent to the US.

The E. coli saga has made the Canadian market uneasy. 90CL manufacturing cow prices continue to slide as Canadian importers step back from the market. US importers are back in the game, albeit at lower prices than what was being received from Canada. Going forward, US and Canadian imported beef demand will likely improve in as retailers look to fill the gap with a 'safer' beef alternative.