Following five years of cattle herd liquidation, United States beef production is forecast to fall by a further 5 per cent in 2024 and US beef exports by 7pc over the same period.
All forecasters are predicting a very positive 2024 for Australian beef in the US market.
Like all forecasts, especially in a large complex market like the US, there are always a few unknowns that could have an impact on those market parameters.
Since its re-entry in 2020, Brazil has quickly become a major player in the US beef import market. Beef imports from Brazil are up 78pc so far this year from record levels last year. They have paid only 4.4 US cents/kilogram import duty under the 2024 "Other Beef" quota of 65,005 tonnes.
Now that quota is full after just two months, Brazil will have to pay the out of quota rate of 26.5pc for the rest of the year.
They will amortise this higher tariff over the remaining 10 months against the cheaper tariff they have already paid under the quota to make the average tariff more workable across the full year.
This way they are better able to compete with zero tariff suppliers like Australia.
Brazil shipped over 150,000 tonnes of beef to the US in 2023.
There are many US end-users, especially some major fast food operators, that will only use Australian or New Zealand imported beef in their grinding mix.
This generates a premium over South American product that the US Department of Agriculture reports is currently around 2-5 cents/pound.
Those same fast food operators, however, are also well aware that the chicken category is larger and growing faster than beef and many see themselves under-indexed in their share of the chicken market.
This could be to beef's disadvantage as beef prices rise.
The US cattle industry is mounting very strong political opposition to the decision by the USDA to allow Paraguay to export fresh beef to the US.
Public debates of this nature that focus on potential shortcomings in the import sector generate an unwanted focus on beef imports in the consumer press.
This is not good timing as the Food Safety and Inspection Service announced last week its final new Product of USA rule. This decision may be problematic for grinding beef imports as the only product that will be able to use this voluntary label will be those derived from animals born, raised, slaughtered and processed in the US.
This contradicts USDA policy since 1985 that has allowed Australian product that is mixed with US product and then undergoes further processing in the US, like hamburger patties, to bear the label.
This new rule has the potential to force companies using imported beef to abandon using the claim, implement a more complex system of input segregation or even limit imported purchases.
The commercial response will be watched closely.
Demurrage and detention charges by shipping lines on Australian meat containers at the port of entry in the US has been one of the most contentious issues in the US meat import sector.
The US Federal Maritime Commission has just released its long-awaited final rule on these charges. The simplification and transparency that the new rule will bring is eagerly awaited by importers including how shipping companies will ultimately respond.
Of real concern, however, for the near future is the International Longshoreman Association labour contract covering over 70,000 workers at 36 US East Coast ports.
The contract ends on September 30. These ports carry more than 80pc of Australia's imported meat business into the US.
The ILA has already warned members to prepare for a coast wide strike in October this year. The disruption would be substantial. Just the fear of a strike will start the whole supply chain looking at alternatives well ahead of time, all of which will no doubt add cost, disruption and uncertainty.
An interesting development that all brand based meat exporters to the US with a brand "promise" should note is the recent lawsuit brought by New York State against the US arm of Brazilian processor JBS.
The lawsuit alleges they have been misleading customers over their climate goals including a plan to reach net zero carbon neutral by 2040 and that they have no viable plan to meet this commitment.
But in the US import market, arrivals of imported beef are up 36pc on the same time last year.
Entries of Australian beef are up 113pc and New Zealand up 50pc. Almost 90pc of NZ entries is grinding beef. For Brazil it's over 70pc.
For Australia it's only around 45pc as Australian processors seek higher-end returns on cuts and chilled product.
Despite the surge in imports, the USDA Indicator price for Australian 90s rose further this week to 273-275 US cents/lb.
In contrast the cattle market across Australia has experienced a downturn across most indicators. Processor margins to the US will benefit while the exchange rate remains stable.
MLA's National Processor Cow Indicator for the week eased for a third week in a row to 209c/kg liveweight. Drier conditions and increased numbers on offer when processors face two short kill weeks around Easter, has resulted in downward pressure on prices with many processors indicating their kill rosters are covered for the immediate future.
The weekly national cattle slaughter fell last week to around 116,000 head, 12,000 down on the previous week and with processing limitations in the run up to Easter, processors will likely look to just bank the better margins.
Total slaughter for the first 10 weeks of the processing year has risen to 960,000, still upward of 20pc above the same period last year.
