A perfect storm of factors has plagued the United States beef market over the past fortnight, dragging imported beef values down.
The lift in product available from New Zealand has been one factor.
Dairy cows are now being culled with regularity in NZ, causing the usual annual flood of imported beef into the US.
Meanwhile, an air of nervousness around future prospects for beef in the US developed just as this cow meat began to become available.
US fed cattle futures fell back from mid-March onwards, largely based on expectations that heavy cattle supplies from April to June could disrupt market conditions.
At the same time a mini trade-war between the US and China started to gain momentum.
Although talk of changes to beef tariffs remain just talk, the industry will still be indirectly affected by a newly introduced 25% Chinese tariff on US pork.
It’s thought that a decent portion of pork once destined for China will now stay in the US, therefore competing against beef for consumers’ attention.
Perhaps more importantly, though, is the impact on the wider economic situation.
Consumer confidence has been strong, resulting in the US consumers turning to beef as their protein of choice versus the cheaper alternatives of chicken and pork.
That, combined with an increase in export sales into Japan and South Korea, has allowed increased domestic supplies to be absorbed by the wider market.
A sudden change in economic certainty could easily cause consumers to revert to chicken and pork and beef prices would have to react downwards for the large volumes of beef to be absorbed.
As of last week both imported 90CL and imported 95CL had fallen by 9c/lb and 12c/lb respectively over just a fortnight.
Exchange rates have not moved in exporters’ favour either, pulling NZ dollar returns to an eight-month low.
The US domestic 90CL market softened just 4c/lb over the same period to US$2.18/lb.
Short-term prospects are looking a little rosier than a fortnight ago.
Cow throughput in NZ is steadying, US cattle futures are recovering somewhat and at this stage there has been no further talk of the US/China trade war escalating.
by Reece Brick