US beef market to remain firm – Rabobank proteins expert tells Producers

On Wednesday 29th April 2015 over 50 people attended an informative morning organised by Rural Lending Specialist Rabobank, held in the Booroomooka Angus Bull Selling complex at Keera Station.

Keynote Speaker was Don Close, Vice President Rabobank Food and Agribusiness Research and Advisory, Animal Protein USA.

Left to Right: Trevor Jorgenson, John Francis, Sinclair Munro, Don Close, Bill Hoffman, Angus Gidley-Baird, Jo Munro & Hugh Munro

Based in St Louis, Missouri in the United States, Mr Close says after years of liquidation due to drought, the US has historical low levels of 20 million beef cows. US herd rebuilding has now commenced, with an increase in US beef cow numbers of 600,000 head between January 1, 2014 and January 1, 2015 “Expectations are for US cow numbers to build between one and two per cent per year for the next four to six years, getting to approx 30 million beef cows” he says. While cows are being retained for this rebuilding, the prices for lean manufacturing beef should stay quite high for at least the next few years.

Cattle Prices are at record highs, As at April 2015, Mr Close says replacement US cows are selling at the equivalent to AUD 3,960. This has been driven by increased profitability for cow/calf producers , whose profits from producing a 550lb calf are now $520, an increase from historical profits of $100p head.

In the US, retail prices for beef are $17 per kg. This is high compared to Pork at $11 and Broilers at $6. It is good to see strong demand for beef in major export markets, such as the US, but we need to be mindful of the competing proteins of chicken and pork. The competing proteins can increase supply quickly, whilst often beef is the preferred protein, affordability does have some influence on menus.

Lower fuel prices are currently helping with consumers budgets, as in the last 12 months gas has fallen from $3.65/gallon to $2.40. The average US driver uses 18gallons/week and the average household owns 2.28 cars. On average annual household savings are $2700. Some of these household savings are used to spend on the preferred protein of beef. Mr Close says, "Keep an eye on the oil price as it has a major impact on consumer spending patterns"

Angus Gidley-Baird, Rabobank Australia's Animal Protein Specialist, gave an overview of the Beef industry and what has changed. In 1975 total USA cattle numbers were 134 million head, whilst in 2015 there is only 90 million head. But due to better management and genetics, Beef Production is about the same with less cattle. Due to drought across most of Australia, there has been high slaughter rates (9.2million head in 2014, over 50% were females) and record beef tonnage exports. If Australia has reasonable rainfall it is expected that Australian cattle prices could move to around a EYCI price of AUD $5/kg. Australia exports around 70% of it's beef to a diverse range of international markets. The US has the advantage of exporting less than 10% of its product, so if there are global problems the US can eat it's way out of trouble.

John Francis from Holmes and Sackett spoke about MLA More Beef from Pastures and what drives profit. With variable seasons - 60% of profits are made in 30% of the years. Optimal stocking rates and effective pasture utilization are vital in driving profit. There is much variation in pasture growth, For many farms in the Inverell area, there was as much cumulative pasture growth in the first four months of 2015, than the whole 12 months of 2014. The key to making profits and avoiding losses is to make decisions to ensure optimal stocking rates (match the feed requirements of the stock with the pasture growth). He says that producers get a high return on money spent on fertiliser, genetics and buying cattle that will put on weight. People should focus on $returns per ha rather than on a per head basis.

Local commercial beef producer Trevor Jorgenson spoke about the decisions he made during the dry period from 2009 to 2014. He is glad his breeder numbers are intact, to do that he had to sell progeny at lighter weights. Early weaning was a successful management tool for him. Bill Hoffman highlighted the tools and technologies available to help beef producers get through winter.