US mountain of protein has beef world nervous

Given the US is both one of Australian beef’s largest markets and largest competitors, the “watch factors” flagged by global analysts during the year have been taken very seriously here.

The year began with talk aplenty of US beef production increases and how much that would push product into lucrative Asian markets Australia has held dear.

The concern was also around an overflowing domestic US market driving imported prices right down.

But early signs were demand was very healthy and in February, international reports said beef volumes in US freezers had actually dropped on the month before.

The 90CL (chemical lean) price, the key beef export price benchmark for Australian exporters, declined at only a slight rate for most of the year, with the acceleration coming in the final quarter.

Against the backdrop of US beef production increases to the tune of 4pc last year and a forecast 3pc again this year, it was a strong sign that demand growth was keeping pace.

As the year wore on, drought conditions in the US threatened a liquidation likely to pump even more product onto a saturated market.

The main risk for Australia, which remains in play, is if the US starts generating larger volumes of lean trimmings by the slaughter of more cows. Then US demand for Australian lean trimmings – one of the largest product lines Australia sends to the US – would be affected, Rabobank’s Angus Gidley-Baird pointed out.

Meanwhile, US exports of beef and veal are travelling about 15pc ahead of 2017.

South Korea, which has consistently been one of Australia’s major export destinations, is now a big purchaser of US beef and veal. In July, data showed a 61pc gain on last year to that market.

Japan sales of US beef have also been up this year.

It is not only US supplies of beef that are growing.

Mr Gidley-Baird said pork and poultry production had increased in the US at the rate of four to five per cent per year for the past few years and had now reached the point of market saturation.

“Thankfully, the US consumer is eating more and their per capita consumption has lifted and is expected to rise again this year,” he said.

Throw in a high-profile trade war with China that has forced big volumes of pork back onto an already full domestic market, along with stalling the momentum of US beef export growth following the re-opening of Chinese doors last year, it is little wonder global beef nerves are jittery about what is happening in the US.