US supply slump boosts Aussie beef trade

US cattle

Domestic young cattle prices are coming back into line with global returns, with the US imported beef price, the 90CL, overtaking the Eastern Young Cattle Indicator (EYCI) for the first time since mid-2020. The EYCI traded at a premium to the 90CL for nearly three years - one of the longest periods on record. But it fell back below the key international price indicator in February, as local prices continued to dip and the 90CL remained relatively firm.

The Easter break has meant current figures are a little bit delayed, but the last reported 90CL figure was 849c/kg, which was 19% higher year-on-year. It has climbed nearly 100c/kg in five weeks and is now at its highest value since October. Domestically in the US, the biggest driver of this has been dwindling local supply as they move into the summer, their main grilling season. Lessening of drought conditions in the US means the most recent weekly cow slaughter numbers were 18.4% lower year-on-year. Steiner Consulting Group indicates lean beef cattle will continue to be limited in supply, especially as the US dairy cow slaughter seasonally declines from March to June. This has also been supporting America’s domestic lean beef prices, although they are rising slower than expected.

As we can see in Figure 2, this has improved the trading scenario for Australian beef in the US, with March exports rising above 17,000 tonnes. Beef exports to the US have been tracking above year-ago levels since the start of 2023, but March was the first time they also rose above the five-year average. The year-to-date volume is now close to 30% above the same period in 2022. That said, exports for those three months are still 12% below the five-year average for January to March, and well below the pre-domestic price climb that started in mid-2020. In comparison, total beef exports for year-to-date are only down 4% on average. It has however lifted the US to make up more than 17% of the market, which again is the highest share since 2020.

This also bodes well for Australian beef going into other markets, as it isn’t only grinding beef prices that have been on the increase in the US. According to Steiner, the feeder cattle index is up close to 24% year-on-year, and the USDA futures price has that increasing a further 45USc/lb by August. Furthermore, according to Meat and Livestock Australia, as of the start of March, heavy steers in the US were trading at a US148¢/kg cwt premium to Australian heavy steer prices.

What does it mean?

Global trade dynamics should be in Australia’s favour and the timing is beneficial as it is happening when we need it most, as supply continues to increase. Factors to watch out for according to US pundits include a possible dip in US consumer demand because of tightening budgets and Australia’s capacity to ramp up processing. However, if these conditions can hold up, the outlook for beef exports looks positive this year, which will help support our domestic prices.

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Key Points

  • 90CL price pulls ahead of EYCI as US supply dips and Australia’s increases.
  • Beef exports to the US surpass five-year-average for March as the US summer approaches.
  • US climbing domestic prices bodes well for Australian beef globally.

Click on figure to expand

Click on figure to expand

Data sources: MLA, Steiner Consulting Group,  Mecardo

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