13 Aug 2015

Rebuild of US beef cow herd will hit NZ

3:37 pm on 13 August 2015

New Zealand's beef prices could fall as the United States rebuilds up its beef herds.

Beef cattle in Rangiwahia, Manawatu.

Beef cattle in Rangiwahia, Manawatu. Photo: RNZ / Alexander Robertson

A new Rabobank report suggests the US is well on its way to rebuilding its herds as it recovers from a drought which has lasted since 2011.

It is expected to reduce the demand and record prices for New Zealand beef in this country's biggest market.

The report - Beef cow repopulation, the case for diversification - showed the US beef industry expected to grow by 3,000,000 head of cattle in the next three to five years.

The beef cow population currently stands at about 30,000,000.

One of the report's authors, Don Close, is a senior analyst with Rabobank based in St Louis, Missouri. He said he expected the initial growth in the US cattle herd to happen quickly, then flatten out.

"The study goes out all the way to 2020 and our objective at the time was to see if cow numbers could get back to something in that 33 million head level, basically at the number of cows we had 2007/8. That would be an inventory that would provide an adequate supply of cattle to both our feed yard networks and our beef processors, that would curb the risk of seeing additional attrition and losses in those sectors.

"I think it's going to be really heavily front-end loaded. Because of the profitability our cow producers currently have with returns per cow, in excess of $US500 a head both last year and this year, we're going to see really aggressive growth here for 2015, 2016 and probably parts of 2017 and then really start to see that growth curve flatten off."

The Rabobank report acknowledged that the increase in the US herd population might impact on the strong demand for New Zealand beef in recent years.

However, Mr Close said the outlook for stock farmers around the world remained positive.

"If you look at the tight supplies and the whole rebuilding conversation we've just had for US producers, I think we're well on our way for rebuilding.

"Clearly I understand the difficulties in the New Zealand market, a lot of that driven by liquidation of the dairy herd and the softness in the dry powdered milk, that will correct itself. But from a longer perspective, the growth in middle income earners globally, and that drive to eat better with an improved income, we really see a very positive picture for all global animal protein markets for years down the road."