TL;DR:
- Significant rise in US imported manufacturing beef prices, attributed to supply stress from the US beef herd reaching 40-year lows due to drought.
- Increased demand from the US, with a strong national economy, and varied demand from Asian markets; China remains flat.
- Australian and global meat stocks are low, driving up prices and competition for available supply.
The United States has seen a notable increase in imported manufacturing beef prices, a trend some market analysts interpret as an early indicator of supply stress. This stress stems from the US beef herd dwindling to its lowest levels in four decades, primarily due to prolonged drought conditions.
In Australian currency, the price for imported 90CL frozen ground beef in the US has risen significantly, marking a 10% increase since the year’s start and a 13% rise from the previous year.
This surge in demand for export manufacturing beef is largely driven by the US, buoyed by a surprisingly strong national economy, with Japan and Korea also contributing to the demand. However, demand from China has remained stagnant. The primary factors behind this uptick in demand and price include reduced global meat stock levels, with many customers now holding lower inventories and seeking to secure supply urgently.
A significant Australian exporter noted the combined impact of weather-related issues and reduced slaughter numbers in the US and Australia, leading to tight global inventories. Despite mixed performance in quick service restaurant demand in North America, overall US demand for imported beef remains solid, supported by the upcoming northern hemisphere grilling season and large end-users already covering a substantial portion of their needs.
Another contributing factor is the shift in the US domestic market, where certain cuts previously used for grinding now hold greater value as whole primals, further reducing the US’s grinding beef output. This shift has increased demand for imported lean trimmings.
The price disparity between imported and domestic beef in the US market continues, partly due to the influx of cheaper Brazilian meat in the food service and manufacturing sectors. This has altered the traditional market dynamics, making it unlikely for imported and domestic trimmings to align in value anytime soon.
Despite a slight uptick in demand from China around the Chinese New Year, the overall demand from China has not seen significant growth, attributed to the sluggish Chinese economy. In contrast, the Australian domestic market for trimmings and manufacturing beef remains robust, with better inventory management compared to the previous year and higher consumer demand than anticipated.
Export processors are now seeing decent margins on slaughter cows, despite the rapid increase in livestock prices since January. This is a positive development for the industry, reflecting the strong market dynamics at play.
Speculation about the second quarter’s US production levels and potential changes in domestic lean values adds another layer of complexity to the market. With US chicken prices also rising, the red meat and poultry supply/demand forecasts by the USDA suggest a significant increase in beef imports in 2024, highlighting the dynamic nature of the global beef market and the ongoing adjustments to meet changing demand patterns.
