America loves Aussie beef: World’s second-biggest beef importer hungry as domestic production declines

Sizzling demand for Australian beef is set to continue with the world’s second-biggest importer — the United States — looking to buy more of the high-value product as its own production declines. The US — already the world’s second-biggest importer of beef after China — is likely to ramp up imports during the next three years as the decline of the country’s cattle herd reaches a “tipping point” next year. But Australia and other countries’ ability to feed the United States’ insatiable demand for beef will be challenged by supply chain constraints, potentially leading to an increase in global beef prices and the redistribution of trade volumes. A new report by Rabobank — the Q4 Global Beef Quarterly — suggests while the reduction in the size of the US cattle herd is “nothing new” it has not previously impacted the amount of domestically-produced beef reaching US consumers. But that is expected to change soon, with the bank forecasting the tipping point to be reached in 2023, when US beef production should fall by three per cent, with annual declines of two to five per cent possible into 2026. This could lead to a potential loss of 400,000 to 500,000 metric tonnes of beef from the US production system per year. Report lead author, Rabobank senior animal protein analyst Angus Gidley-Baird, attributed the decline to a a natural cyclical reduction in cow numbers after the US herd peaked in 2019, compounded by the impacts of recent drought conditions and high feed costs. Mr Gidley-Baird said production and export constraints in many of the world’s beef-producing nations meant international markets would struggle to meet the gap, although the impact of slowing economic conditions and waning consumer confidence around the world may also soften global demand. Mr Gidley-Baird said previous periods of decline in US beef production suggest the country’s retailers and restaurants would look to the global market to fill this void, and US consumers will likely outbid the rest of the world to keep their fill of beef. The question was which beef-exporting nations will fill this gap, he said, “While neighbours Mexico and Canada – the two largest suppliers of beef to the US – are likely to take up some slack, Canada is going through its own cattle herd liquidation phase and likely limited in what it can supply,” Mr Gidley-Baird said. “Australia and New Zealand, the third and fourth largest US suppliers, are the logical next options. “But Australia’s recovery from its own beef cattle liquidation phase is being drawn out with some questions as to whether it will have the cattle available to produce the same volumes it has done in the past.” Mr Gidley-Baird said New Zealand beef production was also expected to be limited while Europe, not a big supplier of beef to the US anyway, was set to continue to record a structural decline in production over that period. “This leaves South America, which has volume, but lacks the trade access needed to fill the sizeable gap in US production,” he said. Mr Gidley-Baird said given the supply pressures in many markets, this meant global beef importers — and consumers — would need to pay more to compete for available supply. “And this could create a strong upside to prices and a redistribution of trade volumes in coming years,” he said. The global beef market currently remains solid, the Rabobank Beef Quarterly report said, with cattle prices generally favourable, supported by predominantly positive seasonal conditions and resilient consumer demand. Favourable seasonal conditions in Australia continue to support producer demand and cattle prices despite softening at the retail end of the supply chain. Mr Gidley-Baird said local beef prices were expected “to hold as we approach the end of the year, with a likely dip in the new year as cattle volumes increase and summer pasture growth starts to dry off”. Labour constraints and tight margins are leading to a reduction in slaughter numbers in the Australian beef market, he said. Mr Gidley-Baird said while the bank believed the Australian cattle herd was growing, but not quickly. “Producers are taking advantage of good feed and high cattle prices to trade cattle rather than build breeding numbers,” he said. “We haven’t seen cattle prices ease and slaughter numbers lift, despite more than two and a half years of good seasonal conditions. “Cattle prices will need to drop further to generate viable processor margins given the rising costs and softer consumer markets.”