US signals better for New Zealand beef

Media Release
26 December 2008
US signals better for New Zealand beef

A recently released report from the Meat Importers Council of America (MICA) indicates that a turnaround in the US beef market could occur early in 2009, in spite of the economic slowdown, says Meat & Wool New Zealand Chairman, Mike Petersen.

“A higher cattle slaughter in the USA and Canada has peaked and is now dropping quickly. At the same time fed cattle inventories are about 6.8 percent below year ago levels and point to a notably lower fed cattle slaughter in the first quarter of 2009, and probably the entire first half of next year.”

US beef supplies will be smaller in the first quarter of 2009 and the latest cattle on feed report shows a continued decline in the number of cattle on feed and cutbacks in cattle placements. Soft demand from feedlots has caused animals to spend more time on grass. Overall, Mr Petersen said the Canadian and US cow slaughter, while still more than 10 percent higher than the same time last year, appeared to have peaked and is now dropping quickly.

"While the improving supply situation in the USA is positive, it cannot be viewed in isolation, and some recovery in global credit markets and the impact that has on countries like Russia will also be key factors in the beef market in first part of 2009. If Russia and to a less extent the EU re-emerge as active beef buyers in the new year, this will absorb product from South America that otherwise could be landed in the USA and more than off-set anticipated tight domestic supply."

The MICA December update has profiled the recent collapse of beef prices, saying the current situation has significant implications for global meat markets. Beef prices rose sharply in the first half of this year as buyers across continents were buoyed by expectations of significant price increases for grain and energy. It is clear that they significantly overestimated demand and the collapse in energy prices led to a cascading impact on other values. Hot markets like Russia stopped buying beef in part because of financing issues, while the US market has again become a preferred destination for New Zealand, Australia and Uruguay beef exports, the report says.

"This report provides a valuable insight into the USA beef market, and coupled with the lower currency is good news for New Zealand beef farmers, who have struggled with declining returns during the last quarter of 2008."

ENDS

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