Trade wars don't dent global beef boom

Roast Beef with Roast potatoes and Yorkshire pudding, prepared by chef Sean Connolly at the Grill. Herald on Sunday photograph by Michael Craig

Tit-for-tat trade bans between Russia and some western countries are not hurting the boom in world beef prices, rural lending specialist Rabobank said.

The bank, in its quarterly report on world beef markets, said beef supply was in a tightening phase in most producing and export regions, and further tightening was expected throughout the rest of this year and in to 2015.

In August, Russian President Vladimir Putin implemented a retaliatory food import ban on countries that had earlier placed sanctions on Russia for supporting pro-Russian separatists fighting Ukraine government forces along its Russian border.

The international dairy trade has been hardest hit by the ban, but beef markets have so far remained largely unscathed. Brazil, the world's biggest beef exporter, has been the biggest beneficiary of import ban, Rabobank said.

"New Zealand beef returns have remained at record levels, and with a forecast of tight supplies and very strong US demand, the industry outlook for the remainder of 2014 and into 2015 is optimistic," Rabobank said.

"There is largely positive news for the global beef industry as strong demand and tight supply are showing no signs of slowing, pushing prices, in some cases record prices, even higher," Rabobank analyst Angus Gidley-Baird said.

In the United States -- New Zealand's biggest beef market -- Rabobank said volatility continued to characterise the market as cattle priced continue to trade at record levels, and consumer appetite remained firm.

Rabobank said processor margins would come under pressure as they competed for limited supply. However, the positive news for processors and exporters was that consumer demand was showing no signs of slowing.

"The ultimate peak of the current market appears to rest on just how much consumers are willing to pay for beef, because the market does not have available supply to meet current demand," Rabobank said.

Over the second and third quarters, the New Zealand beef industry had benefited from very strong demand the United States and Chinese markets, despite strong competition from drought-induced high supply from Australia.

New Zealand farmgate prices have continually risen throughout 2014 and -- as of the second week of September -- remain 12 per cent higher than the same week in 2013, with the North Island bull prices averaging $4.54 a kg (carcass weight).

With prices at this level, and in some cases above $5.00 kg/CWT -- producers are receiving record returns for their stock.

New Zealand slaughter for May, June and July reached a total of just over 700,000 head, 12 per cent higher than the same three month period in 2013.

Local supplies for the remainder of 2014 will contract seasonally, and farmgate prices will remain firm.

James Parsons, chairman and Northern North Island Director for Beef and Lamb New Zealand, said higher beef and lamp prices and a near 11 per decline in the New Zealand dollar since July had buoyed the sector.

"Higher product prices and a more export-friendly exchange rate are great confidence boosters," he said. "All signals are that there will continue to be increased demand for our premium sheep and beef products in export markets and this is providing the confidence to invest in farm businesses," he said.