Farm Tender

Mecardo Analysis - Chinese beef demand impacting NZ too

This article is bought to you by Bruce Robertson Transport and Macarthur Stockfeed and Rural Supplies.

By Angus Brown | Source: StatNZ, MLA, USDA FAS

Key points

· US Export beef prices are tracking higher against seasonal trends.

· NZ exports the US are down, helping support demand for Australian beef.

· Chinese beef demand is responsible for declining NZ flows the US.

In Friday's weekly commentary we took a brief look at rising beef export prices to the US, and some of the reasoning. Today we delve a little deeper into what is going on in New Zealand beef export markets, and how this is impacting prices here.

With a small domestic market, and a very large dairy cow herd, it should come as little surprise that despite being small in area, New Zealand is a relatively large player in world beef export markets. In particular, New Zealand export a lot of lean trim, the sort of beef which used to be cheap, and end up in hamburgers and stir fries.

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Figure 1 shows that the sort of beef you get from dairy cows, 90CL manufacturing beef, has had a serious price rise in both US and Australian terms in the last 11 months. We have documented the rise here in Australia, with rising exports to China basically soaking up extra beef produced. China has also taken some market share from Japan and South Korea, while the US has had to increase prices to secure its volumes.

The US hasn't managed to maintain its supplies from New Zealand however. Figure 2 shows the changes in US beef imports from New Zealand. In July US beef imports from New Zealand were down 44%. For the year to July, US imports from NZ were down 28.5%.

2019-09-17 Cattle 1 2019-09-17 Cattle 2

We can see in figure 2 that May to July are the peak export months for NZ, as cow culling and slaughter ramps up in autumn and winter. This year the US didn't get the beef they usually do. To put volumes in perspective, New Zealand July exports to the US were 10,626 tonnes lower than July 2018. This equates to 45% of Australian exports to New Zealand in July.

There is little question as to where New Zealand's beef is ending up. Figure 3 shows NZ beef export values to China. Actual quantities are hard to extract from the database, so while comparing values with quantities is like comparing apples with oranges, we get the idea. The value of NZ beef exports to China have risen 102% for the year to date, a very solid increase in demand.

2019-09-17 Cattle 3

What does this mean?

Traditionally beef export prices to the US fall in our spring, the northern autumn, as grilling season in the US winds down. This year prices are rising and some of this can be put down to increased Chinese demand.

With New Zealand beef production seasonally falling in the spring, both Chinese and US buyers will be looking to Australia for their manufacturing beef requirements. This means we can expect US beef export prices to maintain their strong levels, and continue to support prices at saleyard level.

www.mecardo.com.au

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