DROUGHT in the US has seen a continued decline in the country’s beef herd to levels not seen since 1952.
Yet, even when the country begins to rebuild, imports are expected to continue to rise which could be good news for Australia long term, says Meat and Livestock Australia chief economist Tim McRae.
The 2012 US Department of Agri-culture (USDA) long-term livestock forecasts estimated the US beef herd at 90.8 million head at January 1 this year.
This included a three per cent drop in beef cows to 29.9m head and the 2011 calf crop which was the smallest since 1950 with just 35.3m newborns, the report said.
Mr McRae said this was a slightly bigger herd drop than most US analysts had forecast, with a 1.5pc drop having been tipped.
It also occurred during a period of high US beef prices and a keenness by producers to rebuild herds.
“We’re hearing a lot of reports out of the US that people want to re-build their herds, but when it’s too dry you just can’t,” Mr McRae said.
The impact of the drought was most evident in the south, with an 11pc decline in Texas to 4.4m head and a 12pc decline in Kansas to 1.4m.
However, some northern States, such as Nebraska, had increased numbers by 4pc to almost 1.9m head.
Meanwhile, Australian exports to the US continued to decline, largely impacted by the high dollar, but also due to competition from other exporting countries, he said.
Since 2001-02 when the dollar was at US 50 cents, Australian beef exports to the US have dropped from 397,000 tonnes (shipped weight) to 167,000t last year.
Other factors influencing this have included the US retaining more of its own beef within its domestic market, as well as periods of herd liquidation, such as during the current drought, he said.
Strong beef production through 2011 as farmers reduced their herds was also beginning to back off, combining with high beef prices and a slow economy to make trading conditions difficult for the meat packers, he said.
“The real problem for meat packers is the record cattle prices, the record wholesale and retail prices, but the consumers don’t want to pay for it,” Mr McRae said.
“The ability to pass on those higher costs is very difficult now.”
Even with the US exporting a record amount of beef in 2011 (883,000t swt), this only chewed up 14pc of their production.
“This was a record year for US beef exports and back at pre-BSE (bovine spongiform encephalopathy, or mad cow disease) levels of 2002-03,” he said.
The USDA predicts the decline to continue until 2013 where it should bottom out at 90.4m head and by 2021 it is expected to reach 97m.
“That’s still not an overly big cattle herd historically,” Mr McRae said.
During this period of rebuilding, the USDA also expected imports to increase from 932,000t (carcase weight) last year to 1.5mt.
“I’d say long term it’s a very optimistic report for Australia in the context, given their exports also aren’t expected to grow much,” he said.
“And also because the US prices are expected to remain at near record prices.”
The present 90cl price from the US is about US205 cents a pound (AU192 cents) which is an all time high, he said.
Unfortunately the high dollar was eroding some of these returns for Australian producers.
However, all these potential positives depend on US consumers and their confidence in the US economy.
“That’s where the rubber’s going to hit the road – what the US consumer can afford to pay for beef in coming years,” he said.
“At the moment they’ve been very shy and that’s understandable given the economic situation.”
There would also be no rest in the short term into Korea and Japan, with the US expected to increase exports to these two countries, providing further competition for Australia.
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