Imported beef prices for the United States market, which until recently drove all markets in countries around the Pacific Rim, have soared to their highest levels.
China has sucked up more imported beef, partly to replace its devastated pork production, and US importers have fought back, forcing prices into record highs.
What analysts call a phenomenal 60% rise in the 95CL bull beef indicator from less than US$2/lb to well over US$3/lb in the past year has caught everyone along the beef supply chain off guard.
The cattle store market and the margins calf rearers get have been slow to react, partly held down by Mycoplasma bovis fears concerning Friesian bulls and the delay in bulls reaching finishing weights.
Store bulls are better buying than store steers for that reason and the margins for finishers have never been better, according to AgriHQ market analyst Mel Croad.
Coming into the peak slaughter season for dairy-beef bulls meat companies must wonder if farmers will hold back cattle in expectation of even better prices ahead.
Official weekly kill figures to week four of the new season for bulls are 10% behind last year, driven by slower offload rates in the North Island as farmers await higher temperatures for pasture growth and quality.
Slaughter rates have lifted in the last week, however, which follows normal trends.
Rabobank animal proteins analyst Blake Holgate said the pork supply gap created by African swine fever is a key factor in the surge of New Zealand beef exports into China this year and the trend is set to extend into 2020.
“Another significant jump in Chinese demand for NZ beef products is forecast over the next 12 months, further cementing China’s recently-acquired position as our largest export market for beef products.
“With this continuing to put upward pressure on export returns we expect to see farmgate pricing at levels equal to, or above, those received in 2019,” he said.
In the second-largest market, the US, the outlook is for good returns in 2020 because of limited availability of NZ and Australian beef supplies and an expected easing of the NZ dollar.
Livestock managers for the major meat companies said the sharp increases in the US prices has only just happened and exporters are still processing and shipping contracts made at lower price levels.
“We don’t buy and sell on the same market and we are forward contracted on bull beef into December,” one said.
The procurement indicator is the most basic of measures and does not factor in non-US markets, hides, by-products and the rising costs of processing and transport.
“This situation is very unusual and goes against the normal price trend at this time of the year so no-one knows what to make of it,” one said.
“Meat companies that haven’t been very profitable recently are not going to hand out large schedule increases every week to bull beef farmers.”
Margins for those farmers are up at $800-$900 a head and replacements for the $2000 finished cattle can be bought for $1100-$1200, livestock buyers said.
Sending to the works bulls that would kill out at 280kg would help fill the forward orders and still provide a good return to farmers, was one suggestion.
