Offal gains momentum, hides fail to find support

Beef offal prices have found support across several categories, as offshore demand for lower value red meat products remains strong. Since the start of the year, more lucrative Asian markets have shifted towards cheaper alternatives as consumers face financial pressures and popular dining outlets continue to be impacted by social restrictions. Premium products such as tongue and thickskirt have failed to find support, easing close to 15% year-on-year. However, lower cost products such as kidney, cheekmeat and liver prices rallied substantially on year-ago levels.

Elevated prices have also been exacerbated by Australia’s tightening cattle supply. As outlined in MLA’s April Cattle Projections report, adult cattle slaughter is forecast to fall nearly 20% in 2020, with beef production forecast to drop 16%, further impacting offal volumes available for export. This could see offal prices move higher, underpinned by reduced supply. Looking beyond international lockdowns, large parts of Asia continue to be affected by outbreaks of African Swine Fever. Subsequently, demand for offal products is unlikely to ease over the next 12 months, despite the impact of COVID-19 on global demand.

The hide market has continued to come under pressure, with tanneries in China and Europe closed, and excess inventory still a challenge. Some movement has resumed in China, with several tanneries resuming operations and moving product through the supply chain. However, with end markets such as furniture and automotive factories still closed, output remains subdued. Premium hides could start to see movement in the coming months with the leather industry pushing for tanneries to re-open in Italy however, for lower valued hides it could be at least 6 to 12 months before buyers generate more activity.

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© Meat & Livestock Australia Limited, 2020