The rising star of beef

[This post was first published in the Fairfax NZ Sunday Star Times on 19 October 2014]

With so much focus on the current dairy downturn, it is easy to miss the rising star of beef. This year beef prices have been hitting record highs, both in US and NZ dollars. Young steers and bulls are fetching anywhere between $1100 and $1600 at slaughter, depending on weight and category.

The key driver has been demand for hamburger beef from the United States. Demand from China has also been increasing.

The New Zealand Meat Industry Association has reported beef exports of 380,000 tonnes earning $2.2 billion dollars for the year ending June 2014. Since 2001, these exports have fluctuated between about 325,000 tonnes and just over 400,000 tonnes with no clear trend. Cull cows from the dairy industry have been contributing an increasing proportion of total production.

In 2014, the North American market took close to 50% of New Zealand’s exports both by weight and value. This has been our number one market for many years. The American demand is for hamburger ‘grinding beef’. The key attributes are that it is lean, with a preference for 95% ‘chemical lean’ (CL), and that it meets food safety standards. Breed and tenderness are irrelevant.

The reason that the Americans are so keen on our lean beef is that they can mix it with their feedlot beef to keep the overall fat content at desirable levels.

North Asia took some 30% by both weight and value in 2014. Within this market, Chinese and Taiwanese demand has been increasing. In contrast, Japanese demand has been in decline. The tonnage exported to Korea in 2014 also declined, but this was more than compensated by the price increase.

The big players on the world market are Brazil, India, Australia and the United States.

Brazil has been No 1 by tonnage for about 10 years but is effectively cut out from the lucrative American and Chinese markets by health regulations. Brazil’s biggest market is Russia. The New Zealand Meat Industry Association notes in their 2014 report, without further comment, that Brazil last year exported 229,000 tonnes to Hong Kong. We can be confident that Hong Kong was not the final destination. It is called the grey trade.

Australia exports large quantities both to China and the United States. It is easily the largest supplier of beef to China.

India has cultural restrictions on beef consumption, but manages to export well over a million tonnes per annum. Foot and mouth disease is endemic in India, and this restricts the trade away from many parts of the world.

The US has always been in the curious situation of being both a large exporter and importer. Their exports are largely of top quality table beef to Japan and Korea, whereas the imports are of cheaper grinding beef. The US has struggled over the last decade with North Asian trade restrictions linked to historical outbreaks of BSE (‘mad cow’ disease) but is now rebuilding its markets.

There are multiple forces influencing current prices for New Zealand beef, but the dominant factor is the American demand for grinding beef. America’s own cattle herds are at their lowest levels for more than 60 years. The immediate factor has been drought. The longer term issue is declining productivity on the American grasslands, with nutrients removed through sale of animals without compensating fertiliser applied.

There are signs that more heifers (young females) are now starting to be retained as breeders, particularly in the American Midwest, where feed conditions are good. But for the next two to three years this will only exacerbate the shortage of local beef. Each animal retained is one less animal that goes to slaughter.

The strong American outlook, combined with increasing Chinese demand, creates clear opportunities for New Zealand beef. But the economics of the traditional New Zealand beef breeding system remain challenging.

The fundamental problem is that nature has designed these cows to have only one calf each year. In these systems, up to half the total feed is used to maintain the cow. Since 1995, New Zealand’s specialist beef breeding herd has declined from 1.4 million to 0.99 million cows.

If New Zealand is to increase its beef production it will be through making better use of surplus calves from the dairy industry. Dairy cows produce a calf each year but less than a third of these are retained as dairy replacements. This leaves more than three million calves that could be raised for beef. Currently only about 450,000 of these are raised each year. The remainder are slaughtered at just a few days of age.

If more dairy-beef animals are grown out, then this will replace another class of pastoral animal. This is because total pasture production is not increasing. On some farms, increased beef production will replace dairy support activities, but in the main it will be at the expense of sheep numbers.

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About Keith Woodford

Keith Woodford is an independent consultant, based in New Zealand, who works internationally on agri-food systems and rural development projects. He holds honorary positions as Professor of Agri-Food Systems at Lincoln University, New Zealand, and as Senior Research Fellow at the Contemporary China Research Centre at Victoria University, Wellington.
This entry was posted in Agribusiness, Meat Industry, The Fairfax SST Articles. Bookmark the permalink.

8 Responses to The rising star of beef

  1. Honora says:

    Yes, if you feed an animal grain, they’ll increase their body fat whether they be a steer, a force-fed goose (pate de fois gras), or a human, so be warned, people. The Japanese love grain-fed beef because it makes the meat marbled with fat i.e. more succulent. I used to wonder when I was at high school why the girls in the lower streams weren’t as slim as the top stream girls. Now I know why: cheap grains rather than expensive vegies and fruit. Have a look in the poor folks’ trollies – white bread, sausages, weetbix etc. etc. This is all they can bring themselves to buy. Sorry for the off-topic comment, but can’t resist…

  2. John says:

    I left New Zealand for Canada in 1970. When I was not in university I worked on a sheep station in the Wairarapa to pay for my expenses. Beef cattle were used as lawn mowers to keep the grass down for the sheep. The main reason New Zealand box beef is popular is that it spends all of its life on grass while most of the Canadian beef comes from the feed lots in Alberta which is all grain fed. Grain fed beef has very little flavor while New Zealand beef is describe as gamey. It’s the New Zealand beef that gives the burger its flavor. I live in PEI on Canada’s east coast and most of our beef comes in from Alberta but we do have a packing plant here which processes beef. This beef spends summers on the grass, grain and corn in winter. It costs more but it is very good. During the winter we use hamburger for stews and shepherd’s pie and to remove the fat we boil it and then sit the pot out in a snow bank for an hour to cool off. The fat solidifies on the top and is skimmed off without losing any flavor.

  3. Pingback: Rural round-up | Homepaddock

  4. Max Dench says:

    Cattle producers, both beef and dairy, should look at maximising their returns in whatever ways possible. Dairy producers should be getting better returns from their bull calves and cull cows and beef producers should be looking at having better milking cows so as their calves grow faster and finish earlier on the better milk, or they could have the option of milking their dairy cows as well. Both beef and dairy farmers should look seriously at dual purpose cattle.
    Dual purpose cattle breeds can supply both beef and milk. One of the best dual purpose breeds is Fleckvieh (German Simmental), as it’s milk yield is not far behind Holstein but of a greater quality and it’s beef yield is as good as any beef breed and is of good quality as well. Fleckvieh are the second most milked breed in Germany and possible Europe. China has seen their potential and they are now high on their list of preferred import cattle to develop as a dual purpose animal to provide them with both beef and milk.
    With dual purpose cattle the dairy farmer wins with better beefier bull calves giving greater returns and better quality cull cows giving greater returns also. The beef farmer gains through a better milking cow which he can choose to either milk as a dairy cow or gain the added benefits of faster growing earlier finishing calves from the extra milk.

  5. Max Dench says:

    Another added benefit with the dual purpose breed Fleckvieh is that they are high on being A2A2, with approximately 70% on testing, second behind Guernsey. That means they would be an easier breed to use to achieve a 100% A2A2 herd than the common dairy breeds and also offering the added beef attributes.

  6. renate de sully says:

    Why doesn´t anybody mention animal welfare? it´s all about making more profit, sickening
    I read Keith Woodfofrd´s article in last Sunday Star Times Business section and was appaled how he not once mentions what high density farming does to the animals. He even recommends factory farming. in other words but still the same.

    • Keith Woodford says:

      Renate, I do indeed have views on animal welfare, and animal welfare is indeed very important. And I will at some time write on those issues. However, talking in generalities is not particularly helpful. The issues need to be considered specifically for each species, and evidence based in relation to specific situations. At this point you do not know my opinions on those specific matters because I have not written about them.
      Keith W.

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