Cheap corn and clever turkey producers: What Australian beef needs to know on the US

Cheap corn and clever turkey producers: What Australian beef needs to know about the US


Commercial
Aa

Analyst Len Steiner presents his latest views and outlooks of the US beef industry.

Aa

CHEAP corn is driving all-time record meat production in the United States, truck drivers are a rare commodity and Australian beef exporters might think about taking a leaf out of the books of American turkey producers.

These were just a few fascinating insights into how things are playing out in what is both one of Australia’s largest beef export markets and biggest beef competitors, the US, as presented by renowned meat business analysis Len Steiner in Brisbane this week.

Mr Steiner, the founder of US-based commodity trading consultants the Steiner Consulting Group, was hosted by Meat and Livestock Australia and addressed an audience of prominent meat industry representatives.

During discussion about the fact Australian boxed beef tends to trade at a discount in the US where fresh is premium, Mr Steiner offered up a “little story” about the Thanksgiving turkey market.

“A lot of people want to eat turkey on this holiday and there is a premium on fresh versus frozen but how do you supply that sort of demand with a limited kill capacity?” he said.

“The turkey industry somehow convinced the USDA (United States Department of Agriculture) that the definition of fresh turkey should be 22 degrees Fahrenheit - that’s about minus 5 degrees Celsius.

“Now if you take a fresh turkey at zero Celsius and drop it on your foot, you’ll probably pick it up, wash it and move on.

“If you drop a 7 kilogram turkey at minus 5, you’ll have a broken foot. Yet our government is saying this is fresh.

“So I’m thinking, what would happen if the Australians could say at 22 degrees Fahrenheit we can get beef to the US and still have it classified it fresh.

“They can tell their customers ‘here is fresh, never frozen beef for your hamburger patties.’ It would mean the US could use a lot more Australian product, that’s for sure.”

WEALTH OF INFORMATION: Founder of US-based commodity trading consultants the Steiner Consulting Group, Len Steiner, speaking in Brisbane this week.

WEALTH OF INFORMATION: Founder of US-based commodity trading consultants the Steiner Consulting Group, Len Steiner, speaking in Brisbane this week.

The push towards fresh as the US consumes greater volumes of beef is just one trend Australia’s meat industry needs to keep an eye on, according to Mr Steiner.

The job market in the US, which continues to recover at a hefty rate, is another.

The US unemployment rate is down to 3.7 per cent, a two-decade low.

“The big problem in the US right now is finding workers. It doesn’t matter if you’re running a packhouse or a restaurant, it’s hard to get people to come to work,” Mr Steiner explained.

The trucking game has been particularly hard hit because a government-imposed shift from manual to electronic logs has meant the bit extra at the end of the day drivers were able to pocket in cash has now disappeared.

“So truck driving got to be a less desirable occupation and it’s now a real scramble to get drivers,” Mr Steiner said.

Companies are pulling out all the tricks - offering $10,000 bonuses for drivers who stick around for a year and buying shiny new Kenworths as incentive.

Labour is now a more expensive input than food for restaurants, so food service sector meat prices are rising at a faster pace than retail.

That will drive people away from restaurants, Mr Steiner explained.

“The problem with that for Australia’s meat industry is that a disproportionate share of what you ship to the US goes into food service as opposed to retail,” he said.

“In the US, even poor food service operators in the ’70s and ’80s could make a profit but not so today. It’s now a much more competitive industry.”

FURTHER READING: Argentina regains access  to the US.

US cattle biggest in the world

US meat production is on a growth curve, driven by cheap corn.

The US is the lowest cost producer of corn in the world and the amount of corn going into livestock and poultry consumption is at the highest point it has been in ten years, Mr Steiner reported.

One reason is the advent of more hybrid and electric cars, which has seen the amount of the corn crop going to ethanol flatline.

This year the US will produce  26,948 billion pounds of beef, or 12b metric tonnes.

By 2020, that is expected to be around 105b pounds, which will be a 15pc increase from 2014.

“The question becomes who is going to consume this, where are you going to ship it to,” Mr Steiner said.

Since 2014, the US cattle herd has grown by 5.5m head and is forecast to continue to grow.

However, if it hits the forecast January 2019 of 94.9m head, that will still be well below the 1975 peak of 132m.

Interestingly, beef production today is close to the same at it was in 1975.

“Beef production is combination of head counts and pounds,” Mr Steiner said.

“Our cattle have gotten bigger. Genetics a big part in that but also growth hormones and the way we are feeding is part of it.

“Most of our cattle are steers and heifers in feedlots and most have hormone implants.

“Non implants and cows on grass are a rare exception - it’s just not the way beef is done in the US.

“We are getting these animals off to market faster; much, much quicker than what they do in Brazil and significantly faster than what you do in Australia.

“If an animal is on the ground a shorter amount of time, it means you need a shorter inventory to support it.”

The herd in the US had also gone black, Mr Steiner said.

The US Government says if a hide is 51pc black, the animal can be classified Angus, which brings a premium.

The story Cheap corn and clever turkey producers: What Australian beef needs to know on the US first appeared on Farm Online.

Aa

From the front page

Sponsored by