Rearing whiteface dairy-beef calves has long been an option for dairy farmers to generate more income, with rearers looking to buy bull calves to put weight on and sell to bull farmers targeting the United States lean beef market.
But the lure of higher profits from maximising milk production has, till recently, made it a relatively unattractive option.
Until recently numbers have remained relatively static, varying only from one year to the next in response to the forecast payout.
However, LIC reports a sharp increase in beef semen sales since 2016 as dairy farmers look to reduce bobby calf numbers and increase the rate of genetic gain.
Increasingly, as pressure comes on to minimise their environmental footprint they find diversification into beef a profitable option because it lets them focus on the peak-producing cows.
LIC’s genetics business manager Greg Hamill says herd-testing information shows a difference of 160kg of milksolids a year from the engine room of the herd, those cows between four and eight years of age, compared with the bottom performing 10-20%.
There is an increasing trend to use beef semen over this tail end of the herd as the best option for improving overall milk production while contributing to better profit and environmental performance.
Beef semen sales contributed 6% of LIC’s total sales in 2016, rising by 17% and 13% in each of the next two years to be running at 9% of sales this season, which, if sustained, will equate to a 50% increase in three years. Beef sales are expected to top 400,000 straws this year out of total sales of 4.6 million with Hereford making up 69% followed by Wagyu, 11% and Angus and Speckle Park 5% each.
Apart from a potentially larger cow cull these statistics suggest at least 100,000 more beef cattle to sell somewhere around the world, which could produce a degree of nervousness considering all the factors that appear to be against red meat consumption.
However, the latest Rabobank Beef Quarterly Review paints a more positive outlook.
It suggests greater demand from China, both for traditional cuisine and for the fast increasing number of McDonald’s and other fast food outlets, will ensure continued growth of China’s imports of manufacturing and prime beef. This positive trend is keeping the beef price firm, ensuring strong competition for product.
For instance, Chinese importers are paying about 3% or 4% more than United States buyers but without China one estimate reckons the price could be anything up to 15% lower than it is.
China offers a major advantage for exporters of prime beef because of its readiness to use a far greater percentage of the carcase, particularly for hotpot chain restaurants and other slow cooking food outlets.
The high-value steak cuts normally make up only 14% of the animal’s value but the Chinese market provides far greater opportunity to optimise returns across the whole carcase.
China takes about 60% of New Zealand beef exports, which is a far cry from the days when over 50% went to the US.
I asked Affco’s sales and marketing manager Mark de Lautour, who has just returned from China, for his assessment whether Chinese demand was a bubble about to burst or sustainable for the foreseeable future.
He agrees the unprecedented level of demand has all the hallmarks of a bubble but doesn’t see it bursting for several years. His reasoning for this confidence is based on three specific factors: population growth, African swine fever and trade factors.
The decision to remove the one-child policy was brought about by the problem of an aging population. Although young Chinese in the largest and most expensive cities, such as Beijing, Shanghai and Guangzhou, are reluctant to have more children the population is forecast to grow exponentially in the smaller cities.
As people migrate from the countryside into these second tier centres, where house prices are significantly lower, demand will increase. The major concern of central government in Beijing is to ensure the supply of food and water to satisfy the growing level of consumption.
The impact of swine fever is huge – 60% of all meat in China is pork and some 400 million pigs have had to be culled, at least 20% of the pig population equivalent to a 12% reduction in domestic meat supply. The consensus is it will take between three and five years for the number of pigs to recover.
The third factor is a combination of trade issues. China has gone to great lengths to close off the grey channels, primarily Vietnam and Hong Kong, through which large quantities of American beef and Indian buffalo found their way into China.
Having successfully closed those channels, the central government is highly unlikely to allow them to open again. On the subject of the US/China trade war de Lautour says local opinion doesn’t see China making any concessions, which could last five more years if Donald Trump is re-elected.
Forecasts indicate the American market won’t lose its passion for real beef hamburgers any time soon so there will still be competitive tension as well as trade war tension between NZ’s two largest markets for beef. This will help to keep prices firm, which will enable exporters to continue paying a satisfactory price for livestock. That, in turn, will encourage dairy farmers, rearers and finishers to maintain the flow of dairy beef.
