HIGHER levels of beef export activity are helping insulate the domestic Australian wholesale beef market from winter price falls, contacts in the wholesale trade have told Beef Central this morning.

Australia’s May beef exports reached just short of 114,000t – the highest monthly level seen since December 2019.

Normally by late June grilling cuts like striploins and cube rolls are coming under price pressure on the domestic market as consumers consign the barbecue to the garage or garden shed, but stronger export demand this year is apparently absorbing some of that product.

One large beef wholesaler with a multi-state presence said there were ‘pockets’ of solid activity in the domestic market at present, dictated by buying activity and the type of cattle currently being processed.

“Apart from regular branded beef program business, many processors have been somewhat reactive, in terms of what they choose to kill, depending on where the better net returns are,” he said.

“Some have swung away from better quality cattle, and all of a sudden its PR steer and cows being processed, because of the more attractive margins they offer,” he said.

“Part of that is being driven by the relatively better export business being done for manufacturing beef, rather than better quality chilled cuts. Some of the ‘prettier’ cattle are hanging around a little longer than normal.”

Rapid expansion in exports to the United States and Japan this year – principally trimmings and manufacturing beef, but also some better cuts – is underpinning that trend. The US last month accounted for more than 31,000t of Australian beef – 15pc higher than April and 85pc above the five year average for May exports.

The gradual decline in US export activity also underpinned growth for Australian exports into Japan last month, reaching almost 25,500t – some 9pc above the five-year seasonal average for May.

In combination, the US (25.6pc) and Japan (22pc) have accounted for almost half (47.6pc) of Australia’s beef exports for the calendar year to date, taking some of the pressure off the domestic Australian wholesale market that arose over the previous two years. It’s been perhaps eight years since two markets have occupied such a dominant export volume position.

Prices ‘all over the place’

Over the past five or six weeks there had been some rises seen in pricing into the US, both for manufacturing lines and cuts – some sold at prices perhaps better than domestic equivalent, one wholesaler said this morning. That included some very large food service end-users looking to secure supplies in advance of further US production declines.

“Despite that, the domestic wholesale market is a little bit all over the place at present,” he said.

“People are trying to replace the same price that they had in their last positions, and it’s getting harder to do. It has to be lower – volume is down, and the tight economic environment for consumers is starting  to squeeze people,” he said.

“The choices in popular cuts is changing, as it always does at this time of year, and some people are trying to hold on price. But this time last year, the industry was killing perhaps 95,000 head a week. This year, that (full working week) figure is north of 140,000. There’s a lot more product in the system looking for a home, and kills are only likely to climb in coming months,” he said.

“Sure, some of that additional beef from a 45,000 head larger weekly kill (year-on-year) is going into export, but the domestic players are filling their kills, also, and are pushing a lot of that meat back into the domestic market. Why? Because it’s easy – there are less logistical challenges, red tape, currency and cold storage issues to deal with than in exporting.”

However several wholesalers anticipate that domestic wholesale demand may decline in coming weeks – particularly if weather remains cold, but also some cautionary spending leading up to end of financial year.

“It’s that time of the year when domestic trading gets more difficult – people start to second-guess themselves. For the past four or five months, it’s been relatively easy to sell meat, but all of a sudden food service and retail customers are staring to push back a bit.”

“People aren’t quite as bullish as they were only a month or two ago. Trade could be described as sluggish, at present.”

While retail was perhaps holding up a little better, the food service market (restaurants, pubs clubs and cafes) was currently in a flat state due to cautionary spending, one contact said.

Wholesale prices holding up

Most cuts have held up a little better than expected so far this winter. Many operators had taken a position for May and June, but getting July and August covered for loins could now be an issue.

“Product that was $10/kg a few weeks ago might be $9.50 or $9.25/kg by next month, because the kills keep bumping up, and domestic demand is not as strong,” one wholesaler said. “It’s going to be difficult to maintain the wholesale price levels seen earlier, especially because kills are being dominated more by PR steer and cow at present.”

Rumps this week in the domestic wholesale market are trading in a fairly widely band – depending on who has the position, and follow-up business. Cow rumps this week are wholesaling as low as $8/kg, up to a better YG steer rump (perhaps undercut removed) as high as $15/kg, with most in the $12-$13/kg range.

Within that range, 100-day grain rumps remain short, due to elevated export demand and the current slaughter trends, and may get priced higher than that, one contact said.

The current nature of the beef kill as described above has partly driven that wide spread, and the better young cattle, particularly in southern states, are currently very hard to procure.

That may change heading into spring, when more well-finished young cattle come to market.

Among grilling cuts, better quality YG and grain steer cube rolls are this week making high 20s, with striploins in the early 20s range.

Domestic trimmings prices remain reasonably firm, led by some consumer downgrading out of muscle cuts into mince, and led by national supermarket retailing and food service strategies. Lean trim is trading from $8.50 to $10/kg at wholesale, from 85CL to 95CL. Those quotes have been both higher and lower in recent months, but have come back to some middle ground this week.

One wholesaler said domestic trimmings prices had in fact been higher than US export equivalent minus freight recently – because of the competitive pressure in the US from sharply-priced Brazilian manufacturing meat, arriving in larger quantities into the US. Meanwhile, US domestic (chilled) trimmings prices have shot up, because US processors are now losing around $200 a head on each beast slaughtered, as local cattle prices sky-rocket.

Among slow-cook winter-suitable cuts, cap-off topsides, chucks, oyster blades and blades are currently coming into higher demand – especially since this week’s cold-snap started.

Cap-off topsides this week are making anywhere from $10 to $13.50/kg, depending on description and quality.

Speciality items like beef cheeks that were hard to find in the wholesale market last year are plentiful at present, as beef kills have risen, one contact said.

“That higher demand trend for slow-cook items has only just started, but it will change over the next eight to ten weeks,” another wholesaler said. “Whether prices rise depends on a few factors, including how hard the national supermarket retailers go in promoting slow-cook beef items this winter.”

“But by-and-large, there has not been a lot of beef specials offered by the major supermarkets, because red meat prices are relatively high, compared with chicken and pork. They are trying to get a bit of margin back, after a couple of tough trading years in fresh meat.”

Another wholesale trade contact said there had been a few ‘large jobs’ around the market lately (export customers) that had helped ‘clean up’ some of those lazy demand pockets – especially some previously serviced by US exporters. That covered a range of products including tenderloins, strips, cubes and some secondary meat cuts.

“That’s helping fill the gap, in helping try to hold the price up a little,” he said.

“But having said that, wholesalers have to be careful, because having made the sale, it’s easy to get caught, because of the changing mix of cattle going into the weekly kill at present,” he said.

“It’s a real juggling act, with a product category that might be in good supply one week, suddenly becoming hard to find. That’s especially evident in kills in the southern states at present. Some people are running late on orders, because of it.”

International trim pricing

Some interesting statistics came to light in a copy of US markets reporting company, UrnerBarry’s weekly world beef price table forwarded to Beef Central this week, reporting week 24, ending 15 June.

It shows 90CL trimmings into the North American market at US$283.80/cwt for Australian product, $269.70 for Brazilian (slightly lower for Argentinean and Uruguan), and $360.40 for US domestic.