US demand softens as price premium closes

The National Medium Cow Indicator continues to close the premium on the US Imported 90CL Indicator, selling at a discount of 26c on 22 October – the smallest margin since October 2016. Easing US domestic demand has meant prices for lean grinding beef tracked downwards, while prices for finished cattle tracked at historically high levels, buoyed by tight supplies and demand for productive cattle. The start of the year saw the margin between the two indicators at 410c, highlighting the evolution in price trends and desynchronisation in the market.

The Medium Cow Indicator achieved 595¢/kg on 22 October and breaking 612¢/kg a week later, indicative of the price surge for medium cow across Australian saleyards. The 90CL price also showed signs of resilience last week, ticking up 27¢ from 621.5¢, helping to open the premium slightly.

The US seasonal dip in demand post Labor Day, combined with a contraction in wholesale prices, have aided the slowdown of US demand, while continued impacts of COVID 19 have presented further challenges for meat packers at some plants. The divergence of prices between Australia’s medium cow and the US 90CL has weakened Australia’s ability to be as competitive on price, with other key markets gaining in attractiveness. Exporters to the US that have experienced significant increases year-on-year are Argentina, Brazil and New Zealand, with Canada, Mexico and Australia still exporting the highest volumes in 2020.

Nevertheless, Australia’s value of beef has been able to offset the 2.6% decline in exports to the US in 2020 due to high domestic finished prices, as production of cattle remains subdued from year-ago levels and producers look to rebuild herds.

© Meat & Livestock Australia Limited, 2020