Chinese demand outlook remains positive while United States imported beef prices are well above last year’s levels, Rabobank says in its latest quarterly report.
US importers are struggling to compete with the prices being paid in China.
Year-on-year from May to July exports to the US were down 42% on value and 34% by volume while exports to China were up 105% by value and 91% by volume, Rabobank said.
The group’s New Zealand-based proteins analyst Blake Holgate said more manufacturing beef is expected to be sent to China as it grapples with the effects of African swine fever on pork production.
November is the time when US demand for imported beef picks up again and if prices there remain elevated that will be positive for NZ values.
Over the last quarter NZ bull prices lifted steadily, in line with the usual trend as kill numbers slowed over winter.
Prime cattle prices rose at a faster rate because of procurement pressure and are now well ahead of last year’s levels.
The market returns should be helped by further weakening of the NZ dollar against the US dollar over the next 12 months.
The cattle kill is now very close to the same levels at this time last year after being up by 5% year-on-year in May.
The Chinese summer is usually the low season for beef consumption but this year demand means retail prices have remained high, reaching a record yuan70/kg (about NZ$15.50/kg) in July.
That is an outstanding price performance given the softening in Chinese GDP, to the lowest levels since 1992, Rabobank said.
Consumers are still shifting from pork to other proteins as the pork price has risen because of the swine fever outbreak and for food safety reasons.
Chinese beef supply is limited and gray channel import levels had fallen as border inspections are stepped up.
Those factors will continue but Rabobank concluded that with beef prices already very high for average consumers, the potential for further increases is limited.
China’s beef imports for the first half of the year were up 53% on a year earlier.
Argentina became the biggest supplier ahead of Brazil, Uruguay and Australia. NZ is about the sixth biggest supplier but a small-volume supplier compared to the leaders.
Low cattle numbers in Australia continue to push prices higher, Rabobank said.
The herd there is estimated at 26 million head, the lowest number in 20 years.
Climate conditions aren’t improving but the stock shortage is still boosting prices.
The cattle slaughter to June was up 14% on a year earlier, with female cattle dominating the numbers, suggesting the cattle inventory, and numbers available for processing, will decline further.
Cattle numbers on grain feed remained at record levels because of dry conditions and low fodder availability.
A big increase in shipments to China triggered an increase in tariffs, the report said.
Brazil is expected to have record beef shipments, spurred by demand from China, Egypt and Russia.
In Europe beef production is lower, partly because of a longer-term gradual decline in European Union cow numbers.
Demand is also lower, with a range of uncertainties, notably Brexit, the EU-Turkey relationship and new trade agreements. First-half of the year prices were down about 5% from a year earlier.
