AFTER four years of deep drought-induced herd culling, the tipping point is just around the corner for United States beef production and big declines from next year are now forecast.
How the gap between what Americans want to eat and what is available will be met is capturing the attention of the global cattle business.
With China also buying every pound of beef it can find in the world right now, many believe the emerging US chasm between supply and demand can only push global beef prices further up, even with the inflationary pressures on households around the world factored in.
Australia, which has one of very few herds in the world that is growing at the moment, is in the box seat.
There are big threats of course - animal disease knocking on the door and a labour crisis preventing beef being processed - but there is arguably amazing opportunity for cattle producers in Australia on the horizon.
ALSO IN CATTLE:
The size of the gap
Agribusiness lending specialist Rabobank believes US beef production will decline by three per cent next year, with additional annual declines of two to five per cent into 2026.
On average, that is the potential loss of 400,000 to 500,000 metric tonnes of beef per year during this period.
Previous periods of decline suggest US retailers and restaurants will look to the global market to fill this void, and US consumers will likely outbid the rest of the world to keep their fill of beef, Rabobank's latest Beef Quarterly, released today, says.
Beef retail prices in the US have remained elevated since COVID-related supply disruptions pushed them to a record-high US $7.55 a pound late last year.
The Rabobank report says they have stayed within 15 to 30 cents of those highs ever since.
Rabobank's global strategist for animal protein Justin Sherrard, speaking from a major beef conference in Colorado in the US this month, said it would likely not be until 2026 that beef production in the States started to come back up again.
"While there have been some positive signs in weather change in the US, with some quite good snowfalls for this time of year, that doesn't translate to improved pasture ability until spring," he said.
"And overall, drought is still widespread - at least half the US herd is still experiencing drought stress.
"Feed costs are high and cattle prices are good - economics are still signalling liquidation is a profitable option."
That situation has meant 2022 will be a record year for US beef production. But it will be the high point - the cattle have run out - and years of decline are about to start.
So where will the US get the beef it wants to consume?
Beef Quarterly report lead author, Rabobank senior animal protein analyst in Australia Angus Gidley-Baird, said it would not be met by production growth in major exporting countries.
Mexico and Canada, the two largest suppliers of beef to the US, might to take up some slack but Canada was going through its own cattle herd liquidation phase and both those countries would be limited in what they could supply, Mr Gidley-Baird said.
Europe, not a big supplier of beef to the US anyway, was set to continue to record a structural decline in production.
That leaves Brazil and Argentina but in combination, these two major South American exporters would not increase production enough to offset the drop in the US, even if trade arrangements were changed to increase exportable volumes, Mr Gidley-Baird said.
China effect
The US, meanwhile, is exporting more today than it ever has before, not just in volume terms but in share of total production, Mr Sherrard reported.
"I don't think that will come back onto the domestic market in a big way," he said.
"Take China, the world's biggest meat import nation - the US industry has fought hard over a long period to get access here, and then to grow the volumes. It won't just step away from that now."
Brazil would have a bit more production next year but was playing with just a tiny little tariff-free quota, Mr Sherrard said.
"They are part of the 'all others' quota and that was filled in March this year. The Brazilians did continue to export but paid a 26pc tariff and that's a different set of economics.
"We think next year that tariff-free quota will be filled by the end of January."
Kiwi production is also expected to slow next year, partly because of the emissions regime livestock producers there are now facing, and the incentives to plant trees that are taking land away from sheep and beef country.
Rabobank forecasts New Zealand beef production to decline 4pc between 2023 and 2025.
All hinges on disease-free
International agriculture market intelligence company Global Agritrends is forecasting that over the next five to 10 years, global beef supplies will not be adequate to keep up with demand.
Chief executive officer Brett Stuart said for the Australian industry, which has a herd that is expanding, the opportunities were fantastic.
"The strong US dollar and huge decline in US beef production next year will open doors for Australia, not just in the US but in markets like Japan and Korea," he said.
"This is a key time for Australia but it all, of course, hinges on your animal disease status."