US – America’s beef industry could risk taking a back seat unless it executes a herd rebuilding plan soon, warn Cattlefax experts.
Lower US cattle slaughter, down 10 per cent for the second half of 2013, will keep falling and growing Chinese demand will tighten other import sources, particularly Australia.
The risk this poses is that, in the absence of supply, beef demand could decrease further due to lack of availability as China’s taste for red meat develops.
Cattlefax global market specialist Brett Stuart emphasised that China has ‘real demand’, based on a middle class demographic of over 300 million, to double in six years.
Mr Stuart sees more Australian beef being shipped to China this year, instead of augmenting the US beef supply.
“During tight supply, the highest bidder gets the beef,” said Mr Stuart. “The highest bidder does not always live in the US.”
Australia has begun shipping 18,000 tonnes of beef to China monthly, he added.
He said: “Global demand is strong but we are going to be producing less this year and this is going to mean upwards price pressure.”
Furthermore, growth in cattle production overseas could further jeopardise the US beef sector’s standing.
Mr Stuart cited China’s new leader, President Xi Jingping, as a potential catalyst for China’s largely ‘stone age’ agricultural sector.
The scope for improvement is vast. Mr Stuart stated that China, as the world’s second largest corn grower, harvests 95 per cent of its product by hand.
India and Brazil have similar stories in that investment in the water buffalo herd and cattle have led to a dramatic rise in exported beef from respective countries.
Both countries are exporting more beef than the US, with Brazil shipping double the amount.
Summarising the response needed from the industry, Cattlefax CEO Randy Blach said: “The US is still the biggest producer of beef in the world. However, this may not be the case for long.”
He warned that a smaller beef industry would mean beef moves from the centre of the plate and becomes a more specialty market.
“The beef cow herd must expand over the next two to four years,” he insisted. “If it doesn’t, this industry will not look the same five years down the road.”
When asked about the likelihood of herd expansion, NCBA President Scott George said profit was essential.
He welcomes analysts forecasting profits across cow/calf, stocker and feedlot operations and said that this must come to fruition if more heifers are going to be retained.
However, the price of cull cow beef clouds the picture as strong grinding meat prices force the hand of some farmers contemplating selling cows.
Mr George also said anyone in financial straits may have pressure from the bank telling them 'don't hold heifers back'.
He commented: "The problem is that expansion means heifers are being taken out of supply, shortening beef supply even more."
"The best way to signal expansion is with profit," summarised Mr George. "Right now there is great profit potential because quite honestly, money talks."