The United States is back as Australia's largest beef export destination.
Our move away from the influence of US beef import quotas in 2005 following our free trade agreement with the US, allowed much greater development of the US chilled and cuts market.
Last week's official US entries of Australian beef of 4703 tonnes was made up of 35 per cent primals and sub primals and 60pc grinding beef.
As the US cattle cycle ends its recent liquidation phase and US domestic beef supplies tighten, US imports of Australian beef have soared, up over 50pc year-on-year, but led by lean grinding beef.
US cow prices are at record levels. US fresh 90s hit a record US$345 cents per pound last week.
What are the factors at play?
Grinding beef in the US is used to make ground beef for a range of consumer outcomes such as hamburgers, hotdogs, sausages, Mexican cuisine, pizzas, meat loaf and lasagne - just to name a few. It makes up close to 50pc of beef consumption in the US.
That is much higher than in Australia.
The basis of the sector is the mixing of lean US grinding beef with US fatty trimmings. Imported beef just augments a lack of US supply of what is usually the lean end of the market in order to achieve the desired (fat-to-lean) ground beef meat block at the least cost.
Ground beef is most frequently reflected as the outcome of mixing 90s (90pc lean beef) with 50s (50pc fatty trimmings). These percentages can vary depending on availability, the fat-to-lean outcome required and the price of each component in the mix.
The basis of the 90s grinding beef market in the US is the non-fed component of the US herd; that is culled cows and bulls.
The basis of the 50s market is the trimmings from US fed cattle - steers and heifers.
A ground meat block commonly used in the US is around 83pc fat-to-lean, which on average requires five loads of 90s mixed with one load of 50s to achieve. That is a 5:1 ratio.
Derrell Peel from Oklahoma State University estimates that each fed steer and heifer roughly produces around 150lbs, or 68 kilograms, of 50s trim.
He estimates that the 5:1 ground beef ratio above therefore requires 750lbs, or 340 kgs, of 90s to produce the 83pc ground beef product using those trimmings.
This, he says, is more or less the boneless trimmings from two culled cows.
Monthly average non-fed beef production in the US peaked in early 2023 and has dropped over 8pc since. Fed beef supplies have only decreased by 4.4pc since its peaks in 2022. Thus the supply of non-fed beef (90s) is tightening much faster in the US than fed beef (50s).
Total cow slaughter in the US has fallen 12.4pc year-on-year to the end of March, and dairy cows by over 14pc. Beef cow slaughter should tighten further as herd rebuilding occurs, further decreasing non-fed beef production and only adding to the market imbalance between 90s and 50s.
The answer is more imports of 90s.
Australia and New Zealand supplied over half of the imported beef trimmings entering the US market last week. Other major suppliers were Canada, Brazil and Uruguay but they will all have supply challenges as the year progresses. Mexico, a major beef exporter to the US, mainly supplies cuts, not trimmings.
Of the major suppliers of grinding beef to the US only Australia and Canada pay zero import tariffs.
NZ and Uruguay pay US 4.4 cents/kg in quota. Brazil will pay 26.4pc on any further entries in 2024.
Canada and Australia are the only major grinding beef suppliers without quota controls. NZ has a US import beef quota of 213,402 tonnes. On current shipment levels that will be filled before the end of the year.
Uruguay's quota is just 20,000 tonnes after which they pay 26.4pc.
Canada is in the same cattle cycle as the US so beef production is falling.
The current discount on Australian frozen 90s (US$295 cents/lb last week) to US domestic fresh 90s is still around 50 cents/lb.
As the year progresses that discount should tighten as the imbalance in supply between 90s and 50s broadens.
This will also impact some US boxed beef primals such as peeled knuckles which have already hit record price levels in concert with fresh 90s as an additional source of lean grinding beef.
As inflationary pressures in the US encourage ground beef consumption in a tightening grinding beef market, all these factors suggest that Australia will be in an advantageous position to meet an increasing demand for lean grinding beef in the US.
Local markets
As expected, Australian national slaughter levels fell in the pre and post Easter short processing weeks (105,695 and 99,230 head respectively).
Slaughter levels will pick up again as we get back to full five day processing weeks. National slaughter for the first 14 weeks of the year is still up 14pc on the same period last year.
US demand has underpinned processor interest in culled cows.
The MLA Processor Cow Indicator has risen 15pc over the last month and was at 240c/kg live weight for the week ending April 12 with heavy cows receiving a 10 cent premium.
There is still an expectation that if current weather patterns abate, it will allow greater numbers to come forward for slaughter.
That supply-side pressure will likely limit further upward price movement in the short term except for cows.
