Analyst Intel

15 November 2019

ACROSS THE RAILS | Bull beef farmers have reason to smile

By Mel Croad

Bull beef farmers are a very happy bunch or at least they should be. Overseas demand for their product has soared this year.  Overseas demand for their product has soared this year. In the space of 12 months imported 95CL bull meat has lifted from a low of US$1.88/lb to now be well over US$3/lb. Factor in the lower exchange rate and export returns for 95CL bull are pitched over NZ$10/kg. It’s no wonder farmgate bull prices have propelled well over $6/kg and in some instances are now priced higher than prime beef. It’s a simple equation of demand outstripping supply. And it begins with two importing powerhouses slugging it out to secure the volumes they so desperately need.

 Twelve months ago China was coming to grips with the devastating toll African swine fever was having on its most sought-after protein – pork. At that point cheaper frozen manufacturing beef provided the perfect alternative to pork and so the race began to secure supplies. The United States was clearly slow off the mark, overlooking the threat China posed to that market – a market the US has controlled for many years 

There is nothing to compare the position of the manufacturing beef market with. Never have we seen US imported beef prices lift so high and fast. Nor has there been dedicated competition from another market. China’s hunger for manufacturing beef was in its infancy this time last year. Sure, it had been nabbing market share off traditional trading partners but not with the same urgency it has shown for manufacturing beef.

 This market is moving with such speed it makes it hard to determine the next move. But it does show the positive impact competition can have on a market. Previously, when US imported beef prices got too hot, the US pulled back and relied on domestic beef. But now the US isn’t calling the shots. The expectation is for beef demand to remain solid into 2020 as export demand once again leaps ahead of production growth. That should limit any downside but even if we see some cooling in demand, farmgate bull prices will remain well above the norm. That must provide a good level of confidence at the farm-gate.