Friday, March 29, 2024

Spike won’t last long

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A spike in United States beef prices in the last couple of weeks is expected to be short-lived ahead of more supply coming into the market.
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Prices were up just US10c/lb or so as demand proved more resilient than expected and with limited supply, NZXAgri analyst Mel Croad said.

“It’s not uncommon. We’ve seen it a few times before at this time of year and it typically doesn’t carry on through October.”

The US increase had not flowed through into schedule rises in New Zealand, partly because of the kiwi dollar inching higher against the greenback and also because processors were aware better offers would not bring many more cattle into the works.

Wet conditions in some important North Island supply regions had slowed down the growth rates.

The bull kill, supplying US95CL, is particularly scarce.

Except for the celebration periods like Thanksgiving Day and Christmas, US demand declined from now on for the winter, just as more domestic supply came onto the market and coinciding probably from the start of November onwards with the build-up of NZ cattle into the market.

Croad believed the NZ market would remain tight through October but then operating prices could fall 15c/kg to 20c/kg from there through to year-end depending on the supply of cattle through that period.

January and February prices would be lower than in December.

There were other factors in the market, notably out of Australia.

Dry conditions there had brought cattle into the processing chain earlier than expected and it was possible that might have fallen away somewhat before the NZ build-up.

If the beef regions in Australia got significant rain over the next couple of months that would also hold supply back and help NZ farmers.

However, supply growth in the US would continue through next year and it was important that some of it was taken up by exports into other markets.

The US took 44% of NZ’s exports and was even more important now for the next several months as frozen beef exports to Japan were stifled by the higher tariff in place there.

US exports were subject to the same tariff increase so were also looking for new markets, Croad said.

China was a good steady market for NZ and was the preferred option to take beef redirected from Japan.

However, Indonesia, Malaysia and Taiwan had also been targeted.

Rabobank also expected NZ beef prices to face further downward pressure.

Animal proteins analyst Blake Holgate believed the impact might not be significant in the short-term because he expected the cattle supply to remain limited until at least November, with lower pricing after that.

He noted the USCL90 (cow) prices were now 11% below the five-year average after ending the second quarter of the year 12% higher than the average. The increased US production meant lower demand for imported grinding beef.

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