Friday, March 29, 2024

Bull beef not yielding

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Meat companies are passing through to beef producers a record low 55% of the United States 95CL spot market price.
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The procurement indicator, which is the M2 bull schedule price over the in-market price expressed in New Zealand dollar terms, has never been this low, AgriHQ senior analyst Mel Croad said.

Last week the US imported 95CL manufacturing beef market price was US$2.66/lb, having risen rapidly by 49c since the end of April because of a slowdown in beef processing capacity in the US amid strong demand.

Converted into NZD that in-market price is $9.44/kg, about 28% higher than in May last year.

Meat companies are paying an average of $5.15/kg in their procurement schedules for M2 bulls in the North Island, hence the 55% procurement ratio. 

Widespread disruption to US meat packing caused by high rates of covid-19 infection in staff and the peak demand for beef consumption around Memorial Day and the easing of lockdown restrictions has driven the higher prices for imported beef, Croad said.

“The slowdown in processing capacity caught everyone by surprise and US weekly kill numbers fell considerably.

“But there isn’t a shortage of cattle – they are still on farms and feedlots waiting to be killed.”

US processors are now recovering their capabilities and slaughter tallies are increasing.

Though the bull schedule has lifted across NZ during the past month the increases do not reflect the $1.50/kg jump in the US market for imported beef.

NZ companies were cautious and delayed their schedule responses and no-one in the meat industry, including farmers, wants schedule prices to fluctuate widely, she said.

It is nearing the end of the bull slaughter season and exporters are less likely to take forward-market positions if they are not confident of adequate supply. 

There is also concern the spike in US import prices might not be sustainable and could ease just as quickly if US processors make further gains in cattle throughput.

However, Croad believes there is room for companies to increase their schedule prices for manufacturing beef given the procurement ratios.

The NZ dollar against the US dollar is moving around but is generally lower by 7-8c compared with last November when import prices reached historical highs. The lower exchange rate effectively pushed down the procurement ratio.

Northland bull beef farmer Geff Cookson said the record low procurement ratio is a disgrace and the comparable Australian farmgate cattle prices prove his point.

Australian meat companies are paying $7.70/kg carcaseweight, which converts to NZ$8.30.

“Our farmers are steadily going backwards at a time when they can least afford it, because of drought.

“You ask why our meat companies pass on only 50% and all I say is because they can.

“It is certainly hard to get any facts out of the companies.”

Cookson, from Kawakawa, finishes more than 500 bulls a year and is restocking with autumn-born weaners.

He targets an average 275kg CW but the latest consignments have been closer to 245kg because of the dry summer.

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