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NZ Beef Prices Drop Marginally Lower

28 September 2017

NEW ZEALAND - A strong New Zealand dollar and declining US imported beef prices have seen New Zealand beef prices drop marginally lower over the past quarter.

Further downward pressure on beef prices is expected as the year progresses, with increased Japanese tariffs on frozen beef imports creating additional headwinds for Kiwi exporters, according to Rabobank’s latest Beef Quarterly report.

Rabobank animal proteins analyst, Blake Holgate said across the three months to the end of August, New Zealand beef prices fell by two per cent in both North and South Islands with reduced domestic beef supply a key factor in preventing a more drastic price drop.

"The number of export cattle slaughtered in the season to date is down 5.9 per cent on last season and this had helped support slaughter prices as processors compete to procure what stock is available," he said.

"Rabobank is expecting New Zealand’s cattle supply to remain limited until at least November, which should ensure any further price-easing in the short term is not significant, however, as domestic supply increases later in the year, prices are likely to face further downward pressure."

US imports down

The report says one of the key factors impacting New Zealand beef prices is the fall-off in demand for grinding beef from US importers.

"Due to increased US domestic production, the demand for imported grinding beef in the US has decreased and this has led to a downward trend in US imported beef prices for lean trimmings," Mr Holgate said.

"The imported US 90 CL price is now sitting 11 per cent below its five-year average, after ending the second quarter 12 per cent above its five-year average. Given the significant volumes of manufacturing beef that New Zealand exports to the US, if this trend continues it is likely to push New Zealand beef prices lower."

Japanese tariff increase

A further factor placing downward pressure on New Zealand beef prices is the recent hike in Japan’s tariff rates.

Mr Holgate said tariff rates for beef imports had recently been lifted to 50 per cent for all countries other than Australia, Mexico and Chile who had trade agreements in place with Japan.

"These new tariffs place New Zealand at a significant disadvantage against Australia which is one of our key competitors for beef exports into Japan. Australia is operating on a tariff rate of 27 per cent, and the difference in tariff levels is likely to force New Zealand beef exporters to divert product from Japan into other markets," he said.

"Japan is New Zealand’s fourth largest export market by value and sixth largest by volume and the new tariffs will most significantly impact our prime beef exports given Japan is a high-value beef market for New Zealand."

Global beef trade

Globally, the report says, the United States has dominated trade in 2017 with US beef exports up by 11 per cent in volume and 15 per cent in value on the previous year.

Mr Holgate says the ongoing availability of product for export from the US, coupled with challenges in exporting from Australia and Brazil, were the key drivers of increased US exports on global markets.

"Australia has been restricted by availability of beef for exports, while in Brazil the ‘weak flesh’ scandal (an investigation into food safety and corruption) slowed exports of all proteins during the first half of this year," Mr Holgate said.

"This has created opportunities for the US to increase its exports, with exports so far this year increasing by 22 per cent to Japan, by 33 per cent to Hong Kong and by five per cent to Canada."

The outcome of ongoing negotiations between the United States and Argentina on access to the US fresh beef market is a further matter the report says has the potential to impact trade dynamics.

TheCattleSite News Desk

Top image via Shutterstock



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