The "unprecedented" reduction in the US cattle herd, will
playing into the hands of rival producers by allowing them to take America's share of export markets, a leading analyst said - even as US
officials lifted their estimate for Australia's beef exports.
Don Close, Rabobank's Texas-based vice-president for animal
proteins, warned that US beef producers "have painted ourselves into a tight
corner" by reducing the domestic cattle herd to 89.3m head as of the start of the
year, the lowest since 1952.
The decline from highs in the 1970s reflects in part
improved productivity, with genetic improvements allowing ranchers to produce
more beef from fewer cattle, but of late by drought which has prompted ranchers
to cull animals rather than bear the elevated cost of feeding them.
Assuming rain returns this year, "we will see out producers
holding onto their cattle, particularly heifers", so reducing the animals
available for beef production.
'Non-viable source of
But even if rains do not appear, US beef supplies could
suffer, as the supplies of domestic cattle available for fattening dwindle, and
without supplement with animals from neighbouring countries.
In Mexico - whose own drought prompted a surge in supplies
of feeder cattle for placement on US feedlots – numbers of animals now appear "extremely
tight", limiting available supplies, especially if pasture renewal encourages
herd rebuilding there too.
Rabobank estimates that, as of the end of last year, 10% of
cattle on US feedlots were of Mexican origin.
Meanwhile, Canada looks an unlikely source of animals, with
producers there "trying to stabilise" cattle numbers after a decline, fuelled
by an outbreak of bovine spongiform encephalopathy (BSA, or mad cow disease)
from a 2005 peak of nearly 15m head.
The country "is a non-viable source of cattle or beef",
despite a recovery in its cattle numbers of 0.5% to 12.275m head last year, Mr
'Tighten like we've
never seen before'
"No matter what happens with our season this year, there
will be a shortage in [US] beef supply going into 2014," Mr Close said,
painting a particularly bright picture for the boost this will provide to Australian
"As soon as we see any signs of recovery, our lean beef
market will tighten up like we've never seen before, providing the real
opportunity for Australian producers," he said.
The comments came as the US Department of Agriculture's
Canberra bureau raised by 55,000 tonnes, to 1.47m tonnes, its forecast for
Australia's beef exports this year – ironically, in part because of dryness
there too putting the brakes on herd rebuilding.
"A return to drier seasonal conditions, rising input costs
and rising rural debt levels are expected to increase slaughtering and reduce
herd build-up sooner than previously expected," the bureau said.
The rise in Australian beef exports, of 3.5% year on year, will
be led by shipments to the US - which is the world's biggest importer of the
meat, besides being the fourth-ranked exporter, in part reflecting the impact
of having a largely grain-fed domestic herd.
"Exports to the US which are expected to increase 14% year-on-year
to fill gaps left by the smallest US cattle herd in many years," the bureau
At 1.47m tonnes, Australia would overtaken Brazil to claim second place among world beef exporters, behind India, according to official USDA estimates.