WITH a significant shift in demand fundamentals for Australian beef, driven largely by the strength of the United States market,
prices are expected to stay high in the foreseeable future.
Rabobank senior beef analyst Angus Gidley-Baird predicted another sizeable lift when the northern dry breaks.
The Eastern Young Cattle Indicator finished last week at a record $4.765 cents a kilogram and the SA prime cattle market crossed the $3/kg mark.
Mr Gidley-Baird said the strong price trajectory showed no signs of letting up, shoring Australian producers supplying a unique
product to the world market.
"A lot of the product being sent to the US is lean ground beef, to supplement the fattier beef that comes out of their feedlot dominated system. Eighty per cent of their cattle go through a feedlot," he said.
"The blend of our product with theirs creates a balanced hamburger patty, and that is where a lot of the demand is coming from.
"There’s been a shift in consumer tastes in the US and there’s a lot more demand for ground beef.
"We’re also seeing a number of consumer shifts as the US economy improves, towards a more premium burger which
means increased demand and a higher price for product.
"Nowhere else in the world is able to supply that market at the moment, but Brazil is trying to get into the market."
Mr Gidley-Baird said it was demand in the US, rather than supply issues, that was pushing up beef prices.
"Primarily it’s the US driving the market, off the back of their drought over there," he said.
"There’s still places in the US experiencing drought, such as California.
"Other areas are starting to recover. Last year their cattle numbers increased by 2pc. They have turned a corner and are in the rebuilding phase but our US analyst Don Close believes
there should continue to be strong demand, as it will take a number of years to rebuild their numbers.
"The US has also sucked a lot of cattle out of Canada and Mexico, so we’ll continue to see strong demand from them for Australian and New Zealand beef."
Mr Gidley-Baird said once dry conditions in the north break, and people look to buy in more cattle, prices would shoot up.
"We’ve seen record slaughter rates in Australia in the past two years, rates we haven’t seen in 35 years," he said.
"If the season improves and we get people coming to the market looking to restock, we’ll expect to see higher prices.
"While it’s expensive to restock, the strong fundamentals with the strong international market means the investment looks to be worth it."