David Kennedy, International Markets Manager, Bord Bia – Irish Food Board

According to the Rabobank Q4 Beef Report 2015 the price volatility that was so prevalent in the US Beef Market toward the end of 2015 is showing signs of some stabilisation coming into 2016.

After relatively stable, albeit high, cattle pricing over the first 8 months of 2015 Q4 saw around a 20% drop in the US steer price in August and September. The market reacted however with a sharp price rebound in October only to have the price fall again in November and settle at 18% below the price at the start of August and around 25% below the yearly high price at the end of March. This pricing volatility in the final quarter of 2015 was driven by 4 factors; heavy carcase weights, beef import/export balance and currency, high retail prices and unbridled market volatility.

1. Heavy carcase weights - the changing size profile of cattle killed in the US in 2015 had an influence in destabilising pricing. Low feed costs over the year led to cattle being finished at higher weights. Average steer carcase weights increased YOY to a peak in the second week of October at 930lb (420kg)- an increase of 3% versus the same time in 2014 and an almost 24lb increase on the previously set weekly record. The output from killing cattle of this size saw an oversupply of trimmings into the market and a consequent price collapse of this cut which is so important in the US manufacturing market.

2. Import/Export balance - A strong US Dollar coupled with herd liquidation activity in Australia and New Zealand lead to US Imports from Australasia being up 35% coming into October. With increased shipments also from Mexico and Uruguay total US imports were up 30% for year to end November with the corresponding export figure down 13%.

3. High Retail Beef Prices - The all retail beef price in Oct 2015 of USD$6.04/lb was slightly higher than the price achieved in Oct 2014. However, when considering that the cattle price has fallen 25-30% over the same 12 month period it is clear to see that margin opportunities were very significant for retailers as long as consumers continued to absorb the prices on shelf.

4. Unbridled market volatility - Fewer cash transactions and volatility in the futures market lead to increased uncertainty in the market. This lead a more challenging market for speculation and difficulty in agreement of long term pricing agreements.

All of the above factors will continue to have some impact as we go into 2016. However, Rabobank are predicting that pricing will now hold firm for a period as supplies remain tight with herd numbers rebuilding. Tightening supplies in Australia coupled with increased completion from South American beef will also have an impact on the market.

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