The great United States herd rebuild that Australian beef exporters are hanging big hopes on looks to be taking longer to kick into gear than predicted, keeping a nasty dampener on demand and prices in key markets.
Ultimately, however, the more the US cattle rancher sells off, the larger the global beef shortage down the track and the more upward pressure on prices for Australian beef.
In a nutshell, what the latest information out of the US about higher-than-expected beef production means is no relief for our cattle market in the short-term but a bullish three to five year outlook, analysts say.
Now emerging is talk that the US rebuild will be slower than previous recoveries, which would bode well for lengthy opportunities in lucrative markets such as Japan for Australian beef.
The just-released July United States Department of Agriculture livestock world trade report included an upwards revision of the US beef production forecast. It rose 1.4 per cent to 12.4 million tonnes compared to the April report.
Meat & Livestock Australia's global supply analyst Tim Jackson said that was still below the 12.9m tonnes produced in 2022, but the revision reflects slower-than-expected American pasture improvement and high US cattle prices encouraging turn-off.
"So far, the continued strength of American production has pushed US exports higher than expected, which has temporarily suppressed demand for Australian beef," he said.
Still, the US cattle herd is now in its fifth year of shrinking beef cow inventories, which will mean the rebuild - when it does start in earnest - will be off a very low level.
Long-serving communications specialist in the cattle and beef industry Wes Ishmael, Cattle Current, said US beef cow herd liquidation continued due to persistent drought in parts of states with the largest beef cattle populations, such as Texas, Oklahoma, Kansas, Missouri and Nebraska.
The recent cattle inventory report from the USDA had 29.4m beef cows in the US on July 1, which was 800,000 head fewer year-on-year, he said.
"More problematic is the continued decline in the number of beef replacement heifers which was 2.4pc less, at 4.05m head," Mr Ishmael said.
"So few heifers will extend the timeline for rebuilding the herd when it begins. That's a key difference in the current cattle cycle compared to a similar point in the previous cycle, from approximately 2012 to 2014."
Mr Ishmael said broadly speaking, many commercial cow-calf producers wanted to begin rebuilding their herds.
"However, even in areas where drought has improved or ended, I sense a great deal of hesitancy, of wanting more certainty there is going to be sustained moisture to grow grass and hay and to replenish water resources," he said.
"It's also worth noting some producers nearing retirement may view the current environment of historically high prices as an opportunity to exit the business."
He said when herd rebuilding did shift into gear, even with abundant feed and water resources, it was likely to be slower than previous recoveries for a number of reasons.
"For instance, besides the dearth of replacement heifers, interest rates are significantly higher than during the previous recovery, adding direct cost, as well as depreciation cost," he said.
Analysts point out that even when production does start to come down in the US, there is a substantial stockpile of beef in key markets, particularly in Asia, that will buffer changes to demand for a period.
Still, beef exporters told Farmonline this week they were 'factoring in' significant opportunity on the back of declining US supply.
"Although substantial reserves of frozen beef will slow the rate of change in demand for Australian beef, continued drawdowns of beef and a shrinking US herd mean that supply will come down over time, and Australian exporters will be well positioned to meet the resulting demand," Mr Jackson said.