US beef market overload causing a drag on prices

Hugh Stringleman MARKETS

Beef

MEAT companies are passing back more of the export beef prices as United States imported prices weaken and the New Zealand dollar strengthens.

The procurement margin for manufacturing beef is at 66%, and meat company margins around $3/ kg, versus 62% and $3.70/kg this time last year.

The procurement margin is a measure of how much of the in-market 95CL beef value the NZ exporters pass back to beef farmers in their schedule prices.

AgriHQ market analysts forecast that the procurement percentage will rise to 69% in July and into the low 70s thereafter.

“The US beef market is going backwards and the immediate outlook is for their import prices to fall further,” AgriHQ senior analyst Mel Croad said.

“For the first time in a while, the US has the upper hand in determining asking prices, with both NZ and Australia supplying ample manufacturing beef into this market.

“This has seen pricing weakness develop and it is expected to remain that way for the short term despite the US peak demand period.

“This weakness is now extending to China and other markets.”

Croad said that beef schedules have tracked sideways over the past three months and remain like their levels last year, despite the weakness in export markets.

As US in-market prices fall away, the procurement percentage for farmers should improve to 70%-plus, AgriHQ has forecast.

The US imported 95CL price has fallen from US285c/lb in April to 255c currently.

Beef farmers in the north are contending with very high on-farm inflation for input costs and are looking to meat companies to help with their meat schedules.

Record profits declared by the companies in 2022 show that their procurement margins have been too high and should be reduced, farmers say.

“The companies made record profits last year and they shouldn’t be too hard on us,” Kawakawa bull beef producer Geff Cookson said.

“But I wouldn’t like to be running a meat company with all the labour shortages.

“Lack of killing space is a big issue and I am restricted to one load of bulls a week.”

A shareholder of Silver Fern Farms, Cookson watches both the NZ and Australian beef prices closely and agrees that both countries have overloaded the US market recently.