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Global cattle prices are on the rise thanks to the US influence, however Australia is missing out

By Richard Brosnan

JENNY KELLY THE WEEKLY TIMES JULY 16, 2014 12:00AM

GLOBAL cattle markets are on a roll thanks mostly to the influence of record beef prices in the US.

In Argentina last month steers weighing 390-430kg ­averaged the equivalent of 217c/kg liveweight in Australian dollar terms.

According to data supplied by Meat and Livestock Australia, this is the highest price recorded in Argentina in more than a decade and one of the few times cattle prices in that nation have outpaced Australia for similar-sized animals.

Likewise, farmers in New Zealand last month received an average of 395.15c/kg carcass weight for P2 steers, easily their highest price in the past decade.

Cattle markets in most of the major beef-producing countries seem to be at all- time highs or, at least, at one of their best levels in recent years.

Australian farmers are missing out on the full benefits of the US-led global beef boom due to the drought in northern Australia, which has caused record cattle kills in the past year, with the high supplies ­allowing exporters to depress prices.

MLA chief economist Tim McRae said the flow-on effect of record cattle prices in the US (which is one of the world’s largest exporters and importers of beef and is highly influential on the world stage) could be seen in most markets except Australia.

“High US cattle prices are having an impact in other countries, with increases in livestock prices,’’ he said.

“Australia is a key exception, with the huge number of cattle being sold overwhelming the other market dynamics.’’

There is no argument cattle prices in Australia should be higher based on export demand, with prices for beef into our major customers of Japan and the US, and even second tier markets throughout Asia and the Middle East, much higher than this time 12 months ago.

But while it is frustrating to have medium-weight cows in saleyards selling for an average of just 112c/kg liveweight this winter when grinding beef prices in the US are at record levels, the upshot of the situation is cattle prices should ­rebound once kill levels in Australia drop.

Many market watchers ­believe US beef prices will rise further.

So far in the US this year, prices for Choice Fed steers have averaged the equivalent of 350c/kg (Australian dollar) liveweight.

To put it in perspective, this time last year these Choice Fed steers were averaging about 260c/kg, according to data supplied by MLA

The other big mover in the US has been grinding beef prices, with imported 90 chemical lean beef (90 per cent red meat, 10 per cent fat) now at 500c/kg, about 100c/kg higher than the average over the past two years.

Just last week MLA published a discussion paper, “Why are US cattle prices so high’’. It came up with six main market drivers. They were:

HERD SIZE: Earlier this year the US Department of Agriculture estimated the American cattle herd at 87.7 million, the lowest in 60 years, down from a peak of 130 million in 1975.

CHEAPER FEED: The US recorded record grain crops and yields last year (and similar results are expected this season), which has reduced feed prices and allowed feedlots to pay more for the reduced availability of young cattle. The US beef market is feedlot-driven, with an estimated one in 10 cattle on feed at any one time, compared to a ratio of about one in 30 in Australia.

LOWER KILL: PROCESSOR OVERCAPACITY: The US is estimated to have the capacity to kill 700,000 to 750,000 cattle a week, but in recent years the total slaughter has declined and is now averaging about 625,000. It means processors have been forced to compete harder for numbers, although there have been some plant closures in recent times.

LABELLING: With country-of-origin labelling, the suggestion is this has made US processors wary of using imported cattle and beef.

CONFIDENCE: High prices boosting US confidence: With the cattle market on a roll, farmer confidence is high, encouraging herd rebuilding, which in turn is reducing the number of heifers and cows being sold.

HIGH DEMAND: Beef consumption in the US has been increasing since 2010.

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