Beef is still king

United States consumers don’t seem to be put off by rising beef prices, while Australian producers see continuing strong demand, Glenys Christian reports.

In Business6 Minutes

United States consumers don’t seem to be put off by rising beef prices, while Australian producers see continuing strong demand, Glenys Christian reports.

United States’ beef producers are concentrating on adding more pounds of beef per animal farmed as their industry enters one of its regular 10 to 12-year liquidation cycles, Kiwi-born editor and publisher of California-based Cattle Buyers’ Weekly, Steve Kay says.

The national herd is contracting because of droughts in some production areas along with rapidly increasing input costs. That resulted in it being down 1.8 million animals or about 2% at 91.90m head at the start of the year. The calf crop at 35m is down 410,000 on the year before and could contract more this year.

This follows record beef exports worth US$10.58 billion last year, 38% up on the previous 12 months and 15% up by volume.

“Beef is still king of the meat case,” he says.

While there’s certainly a place for grassfed imports from Brazil, Australia and New Zealand, due to the US consumer’s palate being adjusted to grain-fed beef “it’s never really taken off”. The same can be said of “faux meat products” he believes, with sales making up only about 1.5% of national domestic beef sales.

With food inflation being the greatest threat, he says cattle producers are putting more weight on fewer animals.

Last year’s Department of Agriculture (USDA) figures showed just over 10% of beef was graded prime and almost 73% choice.

“That’s phenomenal,” he says.

“Twenty years ago it would have been only about 50%.”

Indications were so far that US shoppers were prepared to pay more for beef despite government stimulus cheques to boost retail spending in the wake of Covid-19 coming to an end.

The country was just coming into grilling season, as the best beef demand months of May and June are known.

“And restaurants are open so food service is in full swing again.”

Meanwhile, in Australia high prices are being paid in saleyards as beef producers restock after years of drought.

“The prices are quite astounding,” ANZ’s agricultural economist Susan Kilsby says.

“Commodity prices are so strong and it looks as though they will stay that way for some time.”

At a recent store sale in Roma, Queensland, cows and calves hit almost AU$3000 while Charolais-cross steers fetched a top price of AU$2124, Santa Gertrudis steers made a top price of AU$2329 and Angus-cross steers AU$2316. Angus heifers reached a top price of AU$1575 and Charolais-cross heifers AU$2350.

One of Australia’s biggest calvings in years is being predicted because of recent rains with Meat & Livestock Australia forecasting the national herd will increase by 1.1 million head this year.

Kilsby says the high beef demand is still being driven by China.

“It’s dwarfing the US with what it’s soaking up.”

And while she doesn’t see Australia trying to support China as much as the US, she makes the point that its demand is growing much more rapidly than herd rebuilding can outpace.

“With the lockdowns we’re now seeing in China that’s showing some nervousness amongst exporters and could curtail demand. So we may see prices correct a bit.”

The US trend of trading quality for quantity could be repeated in the Australian market particularly as consumers become more aware of what they’re eating. But she says synthetic beef is going to be needed to meet growing demand anyway.

“It will be a while before it becomes mainstream,” she says.

It is likely to provide more competition in the US market than in China where consumers place more value on where and how beef is produced.

Rabobank’s most recent agribusiness report says beef production in key producing countries should stabilise in the second quarter of this year. Australia is expected to show the largest production gain in the first quarter with a small increase also predicted in Brazil. But this could be slowed later in the year with the chance of further increases in feed costs.

Russia and Ukraine make up nearly 30% of global wheat exports which are under threat from their conflict and trade sanctions put in place by other countries.