AUSTRALIA, North Sydney. Following recent rainfall and tightening supplies, Australian cattle prices have kicked sharply upwards over the last six weeks. During times of rainfall and herd rebuild, Australian prices can often become disjointed from global meat and cattle markets, and this appears to be the case in the current climate.
With such rapid and diverging changes in domestic and global prices over the past month, processor’s will have been under pressure. However, it appears that the growth in Australian cattle prices has just begun to ease, suggesting that a potential market ceiling has been reached.
The outbreak of covid-19 led to a sharp drop in foodservice demand and significant congestion through China ports, with imports of red meat unable to be cleared and distributed. With China buyers withdrawing from purchasing meat in February, US import prices sharply adjusted downwards due to reduced competition. While product is once again beginning to flow through China’s ports, concerns have now shifted to the impact on import demand across the rest of Asia, Europe, the Middle East and North America.
Currencies of major beef suppliers have all depreciated against the US dollar in the past two months. Nevertheless, South American suppliers have also benefited from currency shifts, with sharp drops in the Brazilian Real and the Argentinian Peso keeping cattle prices competitive and making low-cost beef accessible to global markets. The potential exists for the price spread between Australia and South American suppliers to widen, particularly if South American currencies remain under pressure, heightening competition.
US cattle futures have fallen sharply in the past week, as ongoing uncertainty regarding the broader economy, consumer demand and the potential impact on processing capacity has rattled markets. Similarly to Australia, retail channels in the US are currently struggling to keep up with orders as consumers rush to stock up on meat supplies, while foodservice channels face significantly reduced turnover. While US cattle prices have been pressured lower, the strength of the greenback has partly offset these falls for global importers.