The United States’ beef cattle industry is undergoing a major transition, with a significant contraction of its domestic herd diminishing available beef supply locally and offshore. This presents opportunities for New Zealand producers to cash in on increased market share, according to a visiting US meat industry expert.
Rabobank’s Texas-based vice president for animal proteins, Don Close says the reduction in the US herd is ‘unprecedented’, with current on-feed numbers at six per cent lower than 12 months ago and set to continue to decrease into the 2013 Northern Hemisphere summer period.
“Right now, with a significant period of drought, the ongoing tightening of our cattle herd is really becoming increasingly evident,” Close said.
Close is part of Rabobank’s Food & Agribusiness Research and Advisory division where he is responsible for analysing the beef and protein sectors. With a lifetime spent working in many roles in the US beef sector, including livestock buying, broking, meat-packing, risk management and lot-feeding, he has in-depth knowledge of the North American beef cattle industry.
Speaking at various functions across the North and South Islands this week, Close said that, interestingly, although there has been a huge contraction in US corn exports, down 25 per cent year-on-year, there was also a sharp reduction in ethanol production, leaving grain-fed cattle and hog production above 2012 levels.
“These levels are going to drop in 2013 through to 2014, as the rationing in the domestic beef industry has not yet fully occurred,” he said.
The US had also overdrawn on its Mexican feeder cattle, he noted, which is adding to the decline in available beef supplies entering into the US market.
“The total Mexican cattle industry has declined, especially their heifers, eating into the breeding herd, when shipments increased into the US last year,” he said.
“And as the conditions in Mexico recover, we will see a similar story unfold with what’s happening with the US herd, with Mexican cattle numbers looking extremely tight.”
As far as North American supplies are concerned, Close said Canada had also been trying to stabilise its cattle numbers after the challenges surrounding the BSE (Bovine Spongiform Encephalopathy, or ‘Mad Cow Disease’) issue that took place in 2003.
“Canada is a non-viable source of cattle or beef at present,” he said.
Adding to this, the recent difficulties around food security in the UK and Europe in the wake of the horsemeat scandal could potentially open doors for Australian boxed beef exports to be sent to this region, replacing former meat suppliers facing increased scrutiny across their supply chains.
“While we are yet to see the full impact of the horsemeat scenario to know who the winners and losers are in this equation, it certainly raises the question about increased New Zealand exports into Europe to take advantage of the drama there,” he said.
“What is worth noting is the US-Europe Free Trade Agreement – which has not yet been ratified – but if this does eventuate it would probably open the door for greater volumes of US beef entering into Europe taking more market share from other nations.
“The thing we have to realise is that nowadays, we’re playing in an international market – the years of single-country protein supply no longer exist,” he said.
“As soon as we see any signs of recovery, our lean beef market in particular will tighten up like we’ve never seen before, providing the real opportunity for New Zealand producers.”