In Ireland we think of grass as the staple feed of our livestock and dairy sectors, with grain the feed used in the intensive pig and poultry meat sectors.
However, grain is an essential feed for beef produced in both the US and Australia, two of the top three global beef exporters, each trading over 1m tonnes. The same applies to Canada, which exported 409,000t of beef in 2019.
Grain-fed beef is premium product
Grain-fed beef is regarded as the premium beef product in global markets outside South America and Europe.
It is especially the case in the high-value Asian markets of Japan and South Korea, to which China can now be added.
The US and Australia have long been the main suppliers of beef to Japan and South Korea.
The US is now also supplying this market in a significant and growing way since a partial deal was agreed with China
Explosive growth in demand from China over the past decade has been met by a combination of South American supplies to satisfy volume demand with Australia and New Zealand at the high value end.
The US is now also supplying this market in a significant and growing way since a partial deal was agreed with China in January last year to end the trade row between the countries.
Figures released by the US Meat Exporters Federation show that in March 2021, 14,552t of beef was supplied to China, a monthly record.
Australian supply for exports is at a 20-year low due to herd rebuilding after drought
This is only marginally behind Australia, which supplied 14,900t in March, and they have consistently been China’s third largest supplier after Brazil and Argentina.
That has changed in recent months, however, due to the combination of political tensions between China and Australia and the fact that Australian supply for exports is at a 20-year low due to herd rebuilding after drought.
Rebuild in Australia
That has also dramatically reduced Australian beef exports to the US, down a massive 44% to 29,521 in the first three months of 2021, according to Meat and Livestock Australia.
The US is unique in that it is the second largest beef importer in the world after China at the same time as being consistently in the top three beef exporting countries.
Australia is the biggest supplier of beef to the US after Canada and Mexico
This is because the US produces more high-quality steak meat than it consumes, whereas it consumes more manufacturing or burger-type beef than it produces.
Australia is the biggest supplier of beef to the US after Canada and Mexico and as a result overall US beef imports are running 8.5% below last year according to USDA.
US wholesale prices on fire, cattle haven’t followed yet
This has filtered through to US wholesale beef values. They have climbed well ahead of the five-year average, though cattle prices haven’t kept pace.
However, as feed prices surge, and if the demand for beef remains strong, cattle prices will also have to increase as the year progresses.
Rising grain prices will push US, Canadian and Australian prices up, with scarcity of supply already reflected in an Australian beef price over the equivalent of €4.40/kg for several months now.
Brazil’s supply and China’s demand have been shaping the global beef trade
That will give a further price advantage to the South American countries that supply Asia and three-quarters of all beef imports to the EU for the remainder of this year.
Argentina and Uruguay have been exporting close to their full potential and that leaves Brazil, which has been growing its exports in recent years to the point where it now supplies 2m tonnes or 20% of all the beef traded globally.
Brazil’s supply and China’s demand have been shaping the global beef trade, and the question is will both continue to grow for the remainder of this year and beyond?
Rising grain prices are most immediately felt by the intensive sectors of pig and poultry meat, where it is the exclusive diet, and proportionately in livestock sectors depending on the feed mix between grain and grass.
That means pork and chicken, two of the most cost-competitive meats, will be more expensive to produce in a rising grain market, which will ultimately feed through to retail shelves and reopening hospitality sectors.
The same will apply to grain-based beef production, particularly in North America and Australia, though of course intensive beef finishers in Ireland will also be affected. With the global beef market becoming increasingly open and Ireland so dependent on exports, rising global grain costs have to filter through to meat prices.