What’s worse is that these prices are already facing some pricing downside, which is occurring even before the main bull processing season truly gets under way. This is in stark contrast to this time last year, when the market was making strong weekly gains.
Part of the reason why US imported beef prices are much softer is due to the lack of demand and competition from China for New Zealand beef.
Between February and September, NZ beef exports to China dropped by 50,000 tonnes year-on-year, despite total NZ beef exports remaining on par with the previous year. Reports indicate China’s beef imports for the first nine months of this year lifted by close to 40% year-on-year to 1.57 million tonnes.
NZ beef has been swept aside by cheaper and plentiful South American beef, which has enjoyed considerable growth in this market in 2020. With the US itching to take advantage of Phase 1 of their trade agreement with China, this space is only going to get more congested and harder to claw back any ground, especially at the commodity end of the market.
With the beef market lacking the competitive tension seen this time last year, export returns are more reliant on what happens in the US market. In the 2019-20 season, 43% of NZ beef exports were classed as manufacturing beef, of which 59% was shipped to the US. This surge of imported beef from NZ, and some South American countries, has reduced asking prices. This, combined with higher US beef production and the general seasonal easing in beef demand, is resulting in a very different market to a year ago.
Twelve months ago, China was leading the race to secure as much manufacturing beef as possible from NZ. The US were caught off guard, however they quickly rose to the challenge. With two large markets competing for our beef, there was only one direction export values and ultimately farm gate prices headed, and that was up.
AgriHQ data shows in the first week of September 2019, US imported 95CL bull prices were averaging US$2.40/lb. From there they lifted week-on-week, by mid-October they were at US$2.55/lb and climbed to peak in mid-November at US$3.20/lb leading farm gate bull prices to peak at $6.25-$6.50/kg.
In comparison, this September US imported 95CL beef prices started at US$2.48/lb and are currently averaging $2.20/lb. The outlook into November pegs US imported prices softening further. This will continue to influence prices with November farm gate bull prices likely to be sitting over $1/kg behind year-ago levels.
