Friday, March 29, 2024

Beef prices fall

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Cattle farmers are being warned a “wall of United States beef’’ coming onto the market over the next several months could knock a hole in their returns.
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The domestic US supply would have a negative impact on the price of imported beef in to the country, AgriHQ analyst Mel Croad said.

Prices might have peaked in June and since then the impact had been shielded by tight imported beef supply but that was changing.

A dry winter in beef producing parts of Australia had forced production higher there and exporters were already accepting lower US pricing, she said.

That would affect New Zealand exports.

Prices might remain above historical levels but there would probably be financial pain for farmers who had been paying above the odds for store cattle earlier this year, often in the race for scarce stock supply to manage strong pasture growth.

As recently as July beef finishers were paying record prices for rising two-year-old steers.

Affco Holdings general manager Andy Leonard said US prices for imported beef had already fallen about US5c/lb in the last week or so.

“The US production is getting much higher and that fresh product going into the grinding market is easier for them than imported beef.”

NZ supply remained tight and Affco didn’t expect the main bull beef season to start much before the usual time in late November, Leonard said.

With conditions very wet round parts of NZ, especially in the North Island, if spring and summer were warm, farmers might take advantage of feed supply to put more weight on their livestock, which might slow the supply peak.

Leonard saw some positives for the NZ outlook; firstly, that Brazilian beef was still banned from the US market and secondly that Australian supply could reduce again if weather conditions become more favourable as the sector there was still in a herd-rebuilding phase after huge supply levels in recent years.

“We think their production will still be down on their five-year average. We think that will help us a bit and the consumption and economic outlook in the US is positive.

“Whatever happens in the grinding market, that is the market, and we do all we can and we do our best to maximise the price.”

Leonard did not think the new, higher Japanese tariffs on NZ frozen beef would push that product into the US and put further pressure on pricing.

“It depends on the sale mix but I think they’re different products. It’s mainly prime beef going into Japan and that can go to other markets.”

Croad said the US 95CL beef price had peaked in June at US$2.40/lb and was trending steadily lower to $2.20/lb in August. The AgriHQ forecast was for a $2.12 price in September, $2.04 in October, $2.01 in November and $1.96 in December before a slight lift back to $2 in January.

Using the North island schedule price a 295kg to 325kg bull was at NZ$5.65/kg in June, dropping to $5.45 in August. The AgriHQ forecast was $5.35/kg in September, $5.30 in October, $5.25 in November, $5.15 in December and $5.05 in January.

“It took months to get to US$2.40/lb and that’s quite high but it’s just taken weeks to come down,” Croad said.

Till a few weeks ago the expectation was that it would go higher.

She said farmers might hold on to stock through the spring and into summer to add weight but they would have to weigh up the risks on prices when they were ready to sell and their feed outlook through summer.

“They should be starting to work those things out now.”

AgriHQ analysts were talking weekly to exporters and everyone was surprised at the rate of the price fall.

Hamish Brown, who farms at Kimbolton in Manawatu, had increased his beef-to-sheep ratio in recent years and accepted market corrections must be expected.

“We’ve enjoyed six good years in the rising market,” he said.

“Any market has to correct and return to normal. At some stage it has to favour the people buying-in.”

Brown sold rising two-year-olds in autumn, buying Angus weaners as replacements.

“We had to pay up for them and our margins will be smaller this year.

“If you’re buying quality cattle you have to stump up, there’s no way round it. The pressure was on with pasture growth and we had to buy stock.”

He was ready for a market correction and had a breeding operation as well, as a hedge against buying in the market. 

He had noted an easing in sale yards prices in the last couple of weeks as farmers sold heavy livestock just to get them off saturated ground.

Brown was also convinced the market for Angus beef had a strong future and most of the pricing pressure was likely to be experienced in the dairy-cross beef herd more exposed to the US grinding market. 

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