“Globally, the price for lean grinding beef is increasing on growing Chinese demand,” he says. “China has increased imports from New Zealand and Australia, 2 key import beef suppliers for the U.S. and Canada.”
U.S. beef imports from Australia and New Zealand are down a combined 12.5%.
Total Canadian beef imports to mid-November from Australia and New Zealand are down 35.9% and 29.2%, respectively, compared to 2018. Total Canadian beef imports, from all supplying countries, are down 14% in 2019.
“Imported Canadian beef prices have risen, for example, mid-November imported 85% lean trim - defined as 85% lean red meat and 15% fat - is up 42% compared to a year ago. This in turn has supported a 30% year-over-year increase in the domestic 85% lean trim price.”
He says that the last time 85% lean trim prices rose significantly was in 2014-15 when expansion of the U.S. beef cow herd mixed with cattle held on feed longer reduced the slaughter cattle supply.
“This was short lived and the situation quickly corrected itself but prices may not correct as quickly this time given forecasted Chinese meat demand over the next 3 to 5 years.”
Wood adds that there is a strong correlation between the D1-2 slaughter cow price and the grind market with prices typically moving together.
“In 2014-15, cull cow prices rose with the 85% lean trim market, but that has not been the case over the last 6 months.”
Between the start of June and mid-November, the D1-2 cull cow price has decreased about 18%, while the domestic 85% lean trim price has increased 7%.
“Seasonal factors are at play in the cull cow market, including fall culling, increasing U.S. cull cow supplies, seasonal change in lower beef demand and the significant large supplies of pork being produced in the U.S.”
He adds that 85% lean trim is expected to moderate in the short-term, but expectations are for strengthening prices as we move into 2020.
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