The Cattle are Lowing

cows Zeljko Radojko/Adobe Stock

Spend Matters welcomes this guest post form Emma Jayne Smith, market analyst at Mintec.

Since we last wrote about U.S. cattle back in October 2015, prices have fallen to the lowest level seen in four years. U.S. cattle prices were down 23% year-over-year by the end of August, due to rising domestic production and falling exports.

Cattle prices

U.S. beef production increased 4% year-over-year to 6.4 million tonnes during the first half of this year; a result of an increase in both cattle slaughtering and slaughter weights. Since the droughts in 2013, the U.S. has continued its herd expansion. In addition, carcass weights increased in 2016 as farmers chose to maintain their heifers on feed rather than sending them for slaughter in 2015.

Export demand, however, has not been strong enough to absorb the higher beef supplies. U.S. beef exports for June fell by 1% year-over-year to 97,000 tonnes, due to weak demand from overseas markets. Exports to Canada fell 8% year-over-year totalling 14,800 tonnes, Hong Kong declined 32% year-over-year, totalling 7,800 tonnes, and shipments to Taiwan were down 21% year-over-year to 4,700 tonnes.

Aug. 1, 2016, saw Brazil remove all their trade barriers on U.S. beef and beef product exports. The U.S. has not exported any beef into Brazil since 2003 due to a ban put in place by Brazil following bovine spongiform encephalopathy (BSE) fears. As a result, forecast for U.S. exports in 2016 has been revised and are estimated up 9% year-over-year.

Demand may receive a further boost from higher exports to Asia, as cattle slaughterings in Australia are forecast to decline dramatically in 2016, by 16% year-over-year to 7.6 million. The Australian cattle herd is forecast to decline to levels not seen since 1993, further limiting production.

With the current low U.S. beef prices, retailers and food service have been heavily advertising beef on the menus to encourage domestic demand. Will this, combined with new export opportunities, be enough? And should we start stocking up on beef? Could this be the last we see of the low beef prices in the U.S.?

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