NZ set to benefit as the US sends its herd to slaughter

NZ beef exports into the US look promising , as that country continues to reduce it's breeding herd.

High grain prices have made parts of the US beef industry unprofitable, and unable to compete by price with overseas imports.

However NZ farmers are only seeing a percentage of the better prices as the currency grabs the cream. Also dry conditions in many areas have forced farmers to quit stock early at lower weights, as feed begins to run out and the summer approaches.

With Argentina banning exports out of that country, and Australia's exports to the US also well back, NZ has a great opportunity to fill a bigger share of that ground beef market.

The United States cattle industry is expecting to produce its smallest calf crop in 60 years, but is increasing slaughter numbers by sending more cows to the works. Derrell Peel, a US livestock marketing specialist from Oklahoma State University, said in a statement shared with the American beef industry that the 2010 calf crop was expected to be 35.4 million head, the smallest since 1950. He said the total US cattle inventory had decreased by almost 10 million since 1996 to 93.7 million head in January, the smallest cattle inventory since 1959 reports The Waikato Times.

"It is clear that we are maintaining slaughter rates, in the short run, with our females," Mr Peel said. The practice, he said, was not sustainable without accelerating herd liquidation. The US situation was creating opportunities for New Zealand exporters like AFFCO, headquartered at Horotiu, near Hamilton, and the Wallace Corporation, at Waitoa.

Wallace Corporation chief executive Graham Shortland said he had been feeling reasonably bullish about the US grinding beef market all year. "Although we have taken a few deviations during the year, the prices we've been receiving for our grinding beef in the US market have been very firm against the US domestic supply and often above," Mr Shortland said. "Prices tracking above their domestic levels quite consistently are a new dynamic but one that gives me cause to be quite optimistic about the supply/demand dynamics and therefore prices. At the moment, NZ cow grinding meat is 20 US cents per lb above US domestic prices and the USD price for NZ product is well above the three year average for the period."

Mr Shortland said "Unfortunately the high USD/NZD cross rate is sucking considerable revenue out of farmers pockets, and very often the processors too, so although I continue to be optimistic about demand, the exchange rate dynamic is a disappointment on the revenue side."