Beef prices boosted by US demand

Beef prices are tracking at record levels for the month and the ``happy days'' are expected to continue for a while longer, ASB senior rural economist Nathan Penny says.

In ASB's latest Commodities Weekly, Mr Penny said prices (P2 steer/kg) had lifted 2.5% since the end of 2016 so far.

If prices maintained their average over March to date, then they would set a new record level for the month.

A lack of supply, both locally and from Australia, continued to keep New Zealand prices high.

Slaughter rates in New Zealand were very low while US demand for imported beef remained firm, underpinning prices.

That firm demand came despite the acceleration of US beef production over 2016 and it appeared it had not been enough to offset the falling Australian and New Zealand production.

Beef production in New Zealand was at present running 5% behind the corresponding period last year, the latest ANZ Agri Focus report said.

Many of New Zealand's key beef markets were facing supply pressure from competitors.

US beef was dominating the Japanese and Korean markets. Brazil continued to keep the pressure on in China.

Cheap Indian buffalo meat had swamped the Indonesian market since the relaxation of import restrictions imposed in 2011.

US manufacturing beef prices had rallied aggressively since the start of 2017, driven by both lower supplies and robust demand.

Domestic US lean beef supplies remained constrained with the retention of beef cows continuing, while dairy cull numbers had also softened recently.

US demand had been bolstered by a combination of disposable incomes increasing or at slightly above the long-run trend, the economy being close to full employment. The expansion of household wealth due to robust gains in housing and equities, and the new US Administration promising further stimulus reform, buoying confidence contributed as well, the report said.