NZ cattle cull to push more grinding beef to the US

More grinding beef pushed towards what is a key and valuable market to both Australia and NZ, at a time when production in both countries, and the US itself, is lifting is always a concern, analysts say.

The NZ government recently announced plans to cull as many as 150,000 head of mostly dairy cattle in order to rid itself of Mycoplasma bovis. The disease causes significant production losses in dairy cattle but does not present any food safety or human health issues.

It is, in fact, present in all major dairy and beef farming countries, with NZ the only one attempting to eradicate rather than manage it.

Rabobank NZ analysts said the number of cattle to be culled represented approximately only 5pc of New Zealand’s annual beef slaughter - 2.4m cattle were slaughtered in 2016/17 plus 1.8m bobby veal.

Given it was also occurring over a prolonged period of time, it was unlikely to create a significant impact on the beef schedule, they said.

However, this could change if the timing of the bulk of the cows being culled was compounded with either seasonal influx from the beef industry or adverse weather conditions.

The cull is likely to have some impact on killing space, at times prolonging waiting times to get stock killed particularly in the South Island, the analysts reported.

Producers in NZ are busy putting measures in place to protect properties and say the cull might also also see more farms move into beef finishing systems.

Indeed, seedstock operators report bulls sales across NZ over the past month have been very strong - up on last year, which itself was a record year - indicating a growing interest in beef cows.

The NZ Ministry for Primary Industries Situation and Outlook report, released last month, has beef production at 645,000 tonnes this year, up slightly from 2017.

It says consistently strong beef prices since 2015 have played a role in the sector’s growing confidence, indicated by rising beef cattle numbers.

The US represents 44 per cent of export revenue, with most of the trade lean manufacturing beef. Exports to the US have increased 9.7pc in the year ended March 2018.

Chairman of big NZ branded beef program Angus Pure, Tim Brittain, said beef farmers were in very good heart

“Remember in NZ, beef and sheep tends to be run together. Beef has been sold albeit at prices down a little on last year but lamb has been very strong, so together they are in reasonable shape,” he said.

There was, however, a degree of nervousness about the US market, he said.

“It is the one we are most dependent on, although not to the same degree we were 15 or so years ago,” Mr Brittain said.

“The cull, coupled with the drought in Australia, has the potential to make a lot more beef available for this market, which is likely to drive down prices, even though the US seems to be absorbing a fair bit still.

“The situation here price wise has been softened a bit at this stage by some weakening of the NZ dollar.”

Another concern on the horizon for NZ beef, according to the Outlook report, was the increase in US cow slaughtering due to drought in some states.

“If the drought continues, it will increase domestic supplies of leaner beef and lower prices for imports from Australia and NZ,” the report said.