Timely surge in US beef demand

Timely surge in US beef demand

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The April turnaround in beef demand from the US was perfect timing, writes Ken Wilcock.

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SOMETIMES the planets align and sometimes they don't but the current surge in US beef demand appears very timely given China's suspension of trade with four major Australian beef plants.

As is generally the case with these sorts of trade interventions, product already on the water was not affected and did not need to be turned around.

Rather, the disruption centred on Chinese-labelled product that was either on the wharf or still on site at respective processing facilities.

According to one industry contact there was plenty in the pipeline.

This represented significant disruption in terms of having to regroup and work out what to do with it.

The main problem is that an exporter does not have the option of simply redirecting such product to any other market of his choosing as there are very few other countries in the world that will take Chinese labelling.

Inevitably those few that do represent less money so it becomes an exercise in balancing the cost trade-off between selling it as is or bringing it in for reworking.

Fortunately the US market, which had been in the doldrums throughout the first quarter, turned around in mid-April.

By early May the runaway wholesale market in the US was spilling over into the import scene and driving up the price of imported lean.

This of itself would have been responsible for an uptick in volume of Australian product in May but the reworking of product originally intended for China may have added substantially to the total.

From Department of Agriculture's progressive figures thus far, expectation for month of May will be around 20,000 tonnes of beef shipped to the US.

That compares to just 15,000t in April.

Even better, US-based analyst Steiner Consulting reported that the US market continued to surge higher last week on the back of continuing good demand from both retail and foodservice operators.

Indicator 90CL blended cow (US East Coast Aust/NZ lean, FOB US port) was quoted last week at US$265/cwt (hundredweight) up $11 on the week before and up by $57 since mid-March.

While noting the immediacy of delivery associated with these current good prices, Steiner predicts continuing good interest through July and August primarily because of low season in New Zealand for domestic cow slaughter.

That would seem positive news for those less fortunate producers in central-western Queensland who find themselves once again battling a pretty ordinary season.

From Department of Agriculture's progressive figures thus far, expectation for month of May will be around 20,000 tonnes of beef shipped to the US. That compares to just 15,000t in April.

At the moment they are in the midst of mustering and lightening off as quickly as they can.

Winton agent Tom Brodie noted that it is dry cattle that are being sold at this stage, older steers and heifers and empty cows as there are very few weaners at present.

That is because calving is usually November through February and a lot of those calves won't come off the cows until June/July.

If it does not rain in a couple of months they will start into the weaners then.

Tom said that this year, last year and the year before were all late-season rain and this year in the areas where there was only 100-150mm of rainfall there has been very little growth.

Some areas are not as bad as 2013/14/15 but there is a lot of country that is really bare.

If that wasn't enough, grasshoppers have added to the plight.

In something of a double-whammy for those people who did not get a lot of rain, their sparse, more vulnerable pastures seem to have attracted the worst of the menace.

Where the Mitchell grass had a bit of rain and got away they didn't seem to cause as much damage.

Tom believes most properties would now be somewhere between 30-90 per cent destocked.

Last year's heavy one-off rain didn't grow a massive amount of feed, no depth or body to it so things were getting pretty tough by the time it rained again at the end of January.

He believes this may be indicative a fundamental change creeping into the weather pattern.

Rainfall now seems to be in bigger and more isolated events than the traditional spread through the wet season.

As a consequence the country seems more prone to drying out and the pastures more brittle under the extreme heat of summer.

Unfortunately last week's rain has made little difference, with the meaningful falls occurring to the north-east.

Saleyards firing in tight market

GRID prices at southern Queensland export plants remain unchanged at what would normally be considered very good money with 4-tooth ox attracting 600c/kg and 520c for heavy cow.

Facing the traditional low-supply season in the south, one grid at Wagga is 15c ahead on ox and a healthy 40c ahead on cow but even these rates are being hit for six by what is happening in the saleyards.

With a total of 2200 in Wagga's Monday yarding of predominately young store cattle, there was only ever going to be a few decks of heavy steers and two or three hundred cows so while that provides some context, it does not detract from the sheer magnitude of the prices being paid.

Of the medium weight D3 cows in the yarding which processors would normally claim, only half went their way while restockers took the rest.

The works averaged theirs at 299c with a top of 308c while restockers paid up to 336c for an average of 316c. In DW equivalent, those prices are north of 600c/kg and heading toward 700c.

But while restockers helped push cow rates above the odds, local processors alone paid up to 400c/kg for the handful of heavy steers and bullocks taking DW equivalent averages above 700c.

Not surprising then to hear that southern operators are active throughout Queensland in search of cattle.

Defending local grids against such a background is hard going but as one Queensland export processor said this week there is nothing on the revenue side of the business to suggest doing anything different.

The story Timely surge in US beef demand first appeared on Farm Online.

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