US growth more than tipped

US beef growth more than expected


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US beef production growth rates for 2018 were forecast at three per cent, however Rabobank’s US beef analyst, Don Close, is now outlining a growth of five per cent is more likely.

US beef production growth rates for 2018 were forecast at three per cent, however Rabobank’s US beef analyst, Don Close, is now outlining a growth of five per cent is more likely.

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US beef production growth rates for 2018 were forecast at three per cent, however Rabobank’s US beef analyst, Don Close, is now outlining a growth of five per cent is more likely.

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Rabobank Senior Analyst, Angus Gidley-Baird.

Rabobank Senior Analyst, Angus Gidley-Baird.

Towards the end of last year, US beef production was looking like it was starting to slow from the strong rates it had experienced over the last couple of years. Growth rates for 2018 were forecast at three per cent. However, a number of changes has seen Rabobank’s US beef analyst, Don Close, outlining a growth of five per cent is more likely. This increase, and the underlying causes, have the potential to affect the US demand for Australian beef exports and in turn influence the prices we may see in Australia.

It is not just the “quantity” of the extra volume but “where it is to be consumed” and the “type of beef that is produced” that will determine the impact it will have on Australian beef producers.

The main driver of growth in 2017 was the increase in US cattle inventory, although this has slowed recently. Figures released in January 2018, show cow and heifer inventory increased by one per cent year on year to 41.1 million head. More recently, a combination of drought and increasing carcase weights are having an impact on US production, and these factors can have different implications for the Australian beef industry. 

Currently, there are 27 states in America that are showing various degrees of drought stress. Cow population of these 27 states is 31.4 million head, 76 per cent of the US cow population. This will become critically important through the spring rainy season and into the heat of summer. Because if the spring break does not eventuate, this could see a liquidation of the herd and a large increase in cow slaughter around May. This would have an impact on US production of leaner trimmings and ultimately their demand for Australian lean trimmings – our major beef export to the US.

The dry conditions and expanding herd also mean the number of cattle on feed are up eight per cent year-on-year. 

While last year the US consumer absorbed a large amount of their increased domestic production there was also a 10 per cent increase in exports. Around 126,000 additional tonnes were shipped into key export markets, such as Korea and Japan, where it is in competition with Australian product. While US beef consumption per capita is forecast to increase over the next five years, the potential growth in production will be felt by Australian exporters through increased competition in common markets.

While it is “too early to tell” the full extent of any drought impact on the US market, it might be an idea to keep half an eye on the state of the US season over the next couple of months.  

The story US growth more than tipped first appeared on Queensland Country Life.

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