The United States is set to significantly influence the demand and pricing of Australian export beef in 2024, a shift that is occurring later than initially expected. Len Steiner, a renowned US red meat market analyst with over 25 years of experience, shared insights during his annual visit to Australia as part of Meat & Livestock Australia’s industry projections.
Currently, US cow slaughter rates have decreased slightly compared to last year, primarily due to prolonged drought.
However, the decline is not yet substantial. US cow-calf producers are still financially incentivised to send cows to slaughter rather than rebuild herds, despite the potential for high calf returns in the coming years. This trend is partly influenced by the ageing producer population in the US.
Steiner noted that the US cow herd is unlikely to show signs of rebound in the USDA’s upcoming January 1 national herd survey, suggesting any start of herd rebuilding might not be evident until 2025. He anticipates the US cattle herd to be around 86.9 million head by January 1 next year, the smallest since the 1950s, with beef cow numbers at 28.2 million head.
The US beef herd remains in a strong liquidation phase, with a 47% female slaughter ratio indicating continued contraction. Despite rising feeder cattle prices, more females are being put into feedlots rather than back into the cow herd. This unsustainable trend raises concerns about the future of the US cow herd.
The average carcass weights in US slaughter cattle have also been impacting beef supply. Since 2017, the increase in beef carcass weights has slowed and declined, partly due to end-users struggling to handle oversized steer carcasses.
Drought impacts continue to affect some US cattle-producing regions, with pasture conditions remaining below average. This has contributed to record-high US fed cattle prices this year, which have recently dipped due to consumer resistance to high beef prices.
Looking ahead, the US beef cutout versus pork cutout indicates that while Americans are willing to pay a premium for beef, there is a limit to their spending. This economic pressure makes it increasingly difficult for the US to compete in export markets.
Domestic meat and poultry supply in the US has stalled since 2019, with a shift from beef to other proteins. This trend is expected to continue until 2025, with beef experiencing the most significant shortfall.
Steiner believes that in the long term, the US cow-calf industry will undergo aggregation, similar to the US chicken industry. He predicts that smaller beef herds will eventually consolidate into larger operations.
Globally, most major beef-producing countries, including Australia and the US, have cattle inventories below their highest numbers in the past ten years. The beef industry is becoming a specialised commodity, struggling to keep up with population growth. This trend is evident except in Brazil.
In terms of Australia’s export competitors, Brazil has increased beef shipments to the US this year, despite modest quota access. With its tariff-free quota, Australia holds a competitive advantage in the US market. As the US produces less beef, Australian exporters will likely receive a bigger discount over domestically manufacturing beef.
For 2023, the discount on imported 90CL sits around 25%, and similar levels are expected in 2024. Steiner’s price forecasts for 2024 include imported 90CL cow beef into the US, which is almost 28% higher than the average price seen in 2023.
As the US beef supply shortens in the second half of 2024, Australia may see opportunities for a greater proportion of grain-fed chilled primal cuts exports, particularly round cuts, versus the principal trade in frozen manufacturing beef used for burger patties.
