UNITED States beef customers are waking up to the fact that there’s ‘no ‘quick fix’ around the corner to solve the nation’s current chronic beef shortage.

The perfect storm of a US beef herd now at its lowest level since 1961, plus bans on Mexican feeder cattle imports due to concern over screwworm fly taking 1.3 million feeder cattle a year out of the supply chain, and massive 76pc retaliatory tariff burden on Brazilian beef imports since July are now causing deep alarm among US consumers, recent US media coverage shows.

In response, Australian lean frozen beef trimmings prices have continued to ratchet-up over the past two months, with frozen 90s trading last week at A$11.08c/kg (CIF basis). That’s up about $1.50/kg on this time last year (when prices were already marching north) and more than $3/kg higher than August 2023.

US-based Steiner Consulting’s weekly imported beef market report said prices last week on imported trimmings were “firm to very firm, as buyers were slowly realizing that there is no quick fix to the current supply situation.”

Normally, during this time of year, imported beef buyers could look forward to the seasonal increase in domestic lean beef supplies in the fourth quarter, when US cattle producers usually make culling decisions and bring more cows to market, Steiner said.

“However, the lowest cow herd in decades, a relatively young and productive herd, and extremely strong incentives to retain as many cows as possible are likely to limit cull cow numbers,” it’s most recent report said.

Additionally, imported beef supplies are expected to be tighter. Brazil, which accounted for a quarter of all US beef imports in the first half of the year (indeed Brazil for the first time went past Australia as the largest supplier of imported beef in May), is unlikely to ship much beef now that the additional 50pc tariff is in effect.

“To make matters worse, buyers who in the past relied on fed beef cuts to supplement grinding needs are finding it increasingly difficult to do so,” Steiner said.

Last year, USDA Choice grade flats (known as bottom or outside rounds in Australia) traded below the price of 85CL trim in the US market between March and September, along them to be ‘put into the grind.’

“Today, Choice grade flats are trading as much as 60c/kg over the price of 85CL,” Steiner’s report said. “That is not because 85CL prices are lower, they are actually 12pc higher year-on-year, but because the shortfall in production has forced retailers and processors needing deli meat supplies (pastrami etc) to pay up for supplies of flats.”

Fed cattle slaughter plummeting

US fed cattle slaughter (fed steers and heifers only – no cow or bull meat) fortnight ago was 12pc lower than the same week last year – the lowest non- holiday weekly slaughter so far this year.

For the past three weeks, US fed cattle slaughter has been less than 440,000 head.

“Packers are struggling to source enough cattle, not only because feedlot supplies are seasonally lower this time of year, but also because feedlots recognise there will be fewer cattle available for placements this northern hemisphere autumn, and are in no rush to market current inventories,” Steiner said.

Supporting the view that US herd rebuilding is now gaining some momentum, the share of heifers in weekly feeder sales is lower than a year ago, as is the percentage of heifers in feedlots.

“The more immediate impact on supply, however, has come from the lack of imports from Mexico,” Steiner said.

Since November, US imports of Mexican feeder cattle have declined by more than 800,000 head. Reports from Mexico suggest the NWSWF infestation is continuing to spread, with people and wildlife now being impacted. It’s unlikely the US would re-open its border for Mexican feeder cattle until there is clear evidence that the northward movement of NWS has been halted, Steiner said.

With USDA feedlot survey results due out over the weekend, its is anticipated that July placements will likely be the lowest July figure in more than 20 years, below 2014 and 2015 levels, Steiner said.

US consumers suffering ‘ticket shock’

The PBS Newshour Television network in the US (equivalent to Australia’s taxpayer-owned ABC) did a deep dive into US beef prices and consumer reaction this week.

Shopper and homemaker Janet Smith told Newshour ground beef she was buying for US$4.99/lb a few months ago was now selling for $7.99/lb.

“It sems every time I go into the store I get sticker shock,” another older shopper said. “It’s alarming to me, I’m almost afraid of going in there, over what I might find.”

Retail consultant Phil Lempert told Newshour: “Since COVID, food prices in the US have gone up 26pc, because of tariffs, weather and climate impacts and labour costs,  so we are having sticker shock every time we go to the supermarket,” he said.

Official grocery prices in the US actually dipped slightly last month, but one food that keeps climbing on a monthly and yearly basis was ground beef, with up 11.5pc since last year, Newshour said. Muscle cuts were up 11.3pc.

Ground beef prices record high

David Anderson

“Ground beef is the highest it has ever been, since records were kept since the 1980s, now above US$6 a pound for the first time,” ag economist David Anderson from Texas A&M University said.

“It’s all about supply and demand. We are producing much less beef, at the same time as consumers’ demand grows. We’ve really had growing demand for beef for a decade,” he said.

Overall, US consumers seemed committed to beef, even if they were buying different (cheaper) cuts.

“They are not necessarily shifting out of beef into other proteins,” Prof Anderson said.

“On the supply side, the US beef herd is now at 70-year lows. Some weeks, domestic beef production is down 7-8pc compared with a year ago.”

Beef and cattle prices are at all time highs, so in a normal cycle, US farmers would be growing their herds. Why not now? Newshour asked.

“In a word, weather,” Prof Anderson relied. “Herds have not been this low since 1961. When a serious long-term drought hits, were selling off cows because there’s no grass to eat, and feed becomes to expensive.”

“It’s too expensive with high hay prices to keep cows at the moment, so some ranchers are continuing to selling cattle, rather than rebuild.”

“It’s a balancing act,” David Anderson said. “They have a choice: they can sell that cow or calf today at record high prices for meat, or sacrifice that opportunity for her earnings over her life. So far, the cheque-in-hand today is worth more than the future earning potential.”

The threat of New World Screw worm fly out of Mexico had taken another 1.3 million Mexican cattle out of the US, adding to the shortage. The 50pc tariff (on top of an existing 26.4pc tariff) on Brazilian beef worked towards forcing prices even higher.

“I think between now and the end of the year, prices will go up another 5pc,” retail consultant Phil Lempert told Newshour.

Australia’s tariff protection proving an advantage

Commodities reporter Expana in its latest Asia Pacific Beef report has pointed to Australia’s relatively modest US tariff burden (10pc since the start of August – lower than both New Zealand and Brazil) had led some Australian exporters to push lean trimmings prices into the US higher.

However sales to the US faced buyer resistance last week, with replacement costs for leaner trimmings – especially 95pc CL deemed ‘unworkable’, Expana reported on Tuesday. Sales volumes were down 7.7pc from the previous week, although pockets of trading on 90/85CL trims took place during the week, it said.

As of August 11, the Commodity Status Report from the US Customs and Border Protection indicated that Australia had filled 65.22pc of its allocated export quota to the US.