July 16, 2012

US arid pasture conditions cause beef cow slaughter to rise

US pastures have suffered worsening conditions after four weeks of dry weather, with domestic beef cow slaughter rising as a result.

Beef cow slaughter in June was up 6% from May, to average 62,098 head per week. Although June beef cow slaughter remained 12% below the same period last year, it is expected to increase in July and August if the current conditions persist. The combination of poor pastures and high corn prices is expected to prolong the US cow liquidation.

US imported lean beef prices were steady this week, averaging 191.5¢ per pound, remaining about 28¢ below prices of domestic fresh 90CL. Prices in AUD terms averaged marginally higher than last week, at 386.9¢ per kilogramme.

The wide spread between US domestic and imported lean grinding beef has been attributed to several factors, including US retailers' commitment to source domestic lean manufacturing beef to contend with the Country of Origin Label regulations. The sharp decline in prices of fat beef trimmings since March this year has also allowed US end-users to pay higher premiums for fresh domestic lean product.

While the spread between domestic and imported beef usually tightens in the second half of the year on the back of seasonal declines in New Zealand supplies, the reduced domestic lean beef supply early this year is expected to keep domestic prices at a premium to imported beef for the remainder of 2012.