US production growth supports exports

Recently released data from the United States Department of Agriculture (USDA) indicated US commercial beef production continued to increase through February, totaling 877,000 tonnes carcase weight (cwt) and reflecting a 3% increase year-on-year. Total commercial cattle slaughter moved 3.5% higher year-on-year, with February slaughter numbers totaling 2.369 million head (it is important to also highlight that there was one less slaughter day in February compared to the previous year).

Despite larger slaughter numbers, production did not increase to the same extent due to lighter carcase weights – the average carcase in February was down 5kg from the previous year, at 396kg, albeit off a high base.

However, an increase in beef production does not always lead to greater availability for domestic consumers. Steiner Consulting Group (Vol. 15, No. 58) estimated imports were down 11% through February compared to the previous month, as supplies remain constrained out of Australia and New Zealand, while exports increased 15% month-on-month – more than offsetting the increase in production.

The shift in US trade flows is also reflected in the latest USDA cold storage report. As at 28 February 2017, total frozen red meat inventories in the US were 6% lower year-on-year. Frozen beef inventories were down 1% year-on-year, at approximately 227,703 tonnes, with end users increasingly relying on cold stores in order to obtain product. The Daily Livestock Report (Vol. 15, No. 57) reported that the pace of stock drawdown in February was far greater than normally seen at this time of year, with beef inventories moving 6.5% lower from the previous month. 

Overall, the aforementioned US trends have moved in the opposite direction in Australia over the last year. As highlighted above, Australian beef and veal production in January was a five-year low, totaling 140,000 tonnes cwt, as supplies remain tight and the herd rebuild gets underway. Additionally, the average carcase weight in January increased 8kg year-on-year, to 298kg, supported by an improvement in southern seasonal conditions, but also accelerated by cheap grain and a greater number of cattle being placed on feed at the end of 2016.