Higher U.S. beef prices ahead as grills fire up, imports cool down

(Canada Beef Inc. photo)

Chicago/Wellington | Reuters –– Record-high U.S. beef prices will likely climb even higher this summer just as Australia and New Zealand imports dwindle under an extended drought in those countries and demand for steaks in the U.S. rises.

Both countries were among the top three exporters of beef to the U.S. last year as New Zealand and Australian farmers rushed drought-stressed cattle and dairy cows to slaughter.

But as pastures Down Under revive, 2015 exports could shrink five per cent and possibly more, according to some forecasts.

The culling of aging dairy cows should be finished by early July, “and then there will be a sharp pullback in New Zealand beef supply,” said rural economist Con Williams at ANZ Bank.

Australia’s cattle slaughter should diminish around late June, with July and August the time when cutbacks could pinch exports, Meat and Livestock Australia’s North America regional manager, David Pietsch, said in a recent TheBeefRead.com webinar.

Meanwhile, the U.S. herd is still near its lowest level in 63 years at 89.8 million head. Since it takes roughly two years for a calf to reach maturity, the first tangible rebound in domestic cattle numbers is not expected until 2016.

For 2015, the U.S. Department of Agriculture has forecast beef output to be down 0.2 per cent from 2014, and cattle market analysts foresee only a 0.2 per cent increase in 2016.

Demand slip may temper price gains

Despite scarce cattle supplies, analysts said it is likely that wholesale prices will struggle to move much higher than the record $263.81 on Jan. 14 and the previous high of $263.66 on July 31, 2014, at the peak of summer grilling demand (all figures US$).

U.S. exports have been hurt by the strong dollar, keeping more supplies at home, while record pork production offers a less expensive alternative to beef.

Agricultural research and advisory firm Sterling Marketing president John Nalivka expects wholesale beef to plateau around the mid-$260s.

For the week ending May 1, choice wholesale beef averaged $256.94/cwt, up $25.07 from a year ago and entrenched above $200, a price that prior to the severe U.S. drought of 2012 which trimmed supplies was thought prohibitive for supermarkets and food service buyers.

Theopolis Waters and Naomi Tajitsu report for Reuters from Chicago and Wellington, New Zealand respectively. Additional reporting for Reuters by Colin Packham in Australia.

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