Beef prices to stay high

“The US beef cycle is dead. I am not a big believer in cycles anymore in terms of agricultural markets. I don’t think we have cycles anymore and certainly the US beef cycle has been dead for about 10 years,” Moynihan, director of dairy research for NZ & Asia, said in answer to a question on beef prices at the DairyNZ Farmers Forum in Kerikeri.

“They have been in a state of constant decline with their cattle numbers. That said, grain prices are so low that there is a rebuilding phase starting to happen. That will happen for the next two to three years. But we are not going to see a huge lift in numbers. That market will remain very, very tight.” 

Moynihan said beef prices have entered a structural change similar to that seen in dairy in 2006-2007. “We are now in a new price bracket because there is just not enough cattle around. To cover costs of production and incentivise production of beef we will have to stay at high levels historically. Not at the peaks we saw last year but certainly at 20-30% above historic averages.”

She said dairy beef doesn’t influence the market in the US to quite the same extent as here. 

“US dairy farmers are a bit more opportunistic about cows and beef prices and certainly took advantage of it late last year. I met with a dairy farmer who was out here earlier this year and they were saying they could actually bring heifers into the dairy herd and make a cash gain on what they were selling the cull cows for.

“They were getting about US$2000 for a cull cow and with the cost of rearing and bringing the heifers in they were getting about US$300 a head cash gain which is extraordinary.”

That won’t last forever but it illustrates how opportunistic they are about replacements, she said.