Growing US herd may affect demand for NZ beef

With around 50 per cent of New Zealand's beef exports destined for the US, the rebuilding of the US cow herd may impact the strong demand for Kiwi beef seen in recent years. Photo / Greg Bowker

The cow herd in the United States is rebuilding after a drought-induced decline, which may start to affect US demand for New Zealand beef imports, rural lender Rabobank said.

The bank said the US beef cow herd is expected to grow by more than three million head in the next three to five years from a 2014 low of 29 million.

"With around 50 per cent of New Zealand's beef exports destined for the US, the rebuilding of the US cow herd may impact the strong demand for Kiwi beef seen in recent years," the bank said.

Senior Rabobank analyst Don Close said the initial growth phase would be relatively quick and would flatten out.

"We are going to see the process happen in two phases and in different geographies than we would have seen a few years ago," Close said in a report.

"Although it will depend on factors such as exports and weather, I expect a total of 3.5 to four million head more than the 2014 low of 29 million beef cows."

Of that total, 1.7 million head will come from newly developed capacity in the central US - areas typically focused on row crop production.

"Rabobank animal proteins analyst Matt Costello says that while the developments taking place in the US herd were relevant for the export trade, the outlook for New Zealand's beef exports remained positive."

We had always expected that at some stage the US herd would 'turn the corner' and begin to rebuild," Costello said.

"Over time, the increase in US slaughter cattle will likely lead to a softer demand picture for New Zealand beef exports, but we expect the local market prices to hold firm for the medium term."

This view is also being supported by a weakening New Zealand dollar and a decline in the Australian beef cattle herd.

"Competition will remain fierce in the US market, particularly from other protein sources, but New Zealand is in a great position to remain a significant exporter to the US beef market in the coming years," Costello said.