US burger boom opens beef door for NZ
New Zealand farmers would be wise to increase cattle numbers the next four years to supply a United States market critically short of lean beef, says the first Kiwi to be accepted into the US Meat Industry Hall of Fame.
California-based Steve Kay, whose family farmed at Duvauchelle Bay in Banks Peninsula for 107 years, has watched as prices have reached "unprecedented" levels for lean manufactured 90CL beef.
He said Kiwi farmers should grow their herds and reflect on conditions unlikely to assist a market short of beef in the expanding hamburger trade.
"We will have a shortage of beef the next three to four years and my message to New Zealand farmers is to take advantage of it when you can."
The shortage could have a significant impact on New Zealand beef production, he said.
"The US market, especially for lean manufacturing 90CL beef, is in critically short supply and the reason is because we have had a hamburger boom the last 10 years.
''The ubiquitous hamburger has been founded by the traditional [companies] of McDonalds, Burger King and Wendy's, but they have been competing with upstart burger chains like Smashburgers and Five Guys and they are all scrambling for raw material and the result is imports and exports are at record levels."
Kay, 65, has written and published the Cattle Buyers Weekly since it began in 1987 and writes for many US publications as well as analysing beef markets in monthly columns to the US, Canada and Australia. The Christchurch-trained journalist is in contact with major meat companies in North and South America and economists around the world and attends the speaker circuit as a "detached observer" of the US beef market.
He was left "humbled" as one of six newcomers added to the Hall of Fame last month at a ceremony attended by major players in the US$80 billion beef industry.
Kay said much of the US-bound manufacturing beef was supplied in New Zealand by the dairy industry and there was room for more beef production.
"Increase your production of beef because we desperately need beef in the US. In per capita terms we are almost at an all-time low." Compounding the shortage was that the US remained a major exporter and Australian imports into the country were down from drought, with drought also over much of New Zealand last year.
Prices for 90CL beef were US$220 per hundredweight at the start of the year and last month broke US$300, while grain-fed beef was also at record levels. The price acceleration in the last year has been the largest recorded in the US.
Kay said the fast growth was because a tipping point had been reached in supply and demand, with dairy cattle in decline the last 14 years from a national herd of 105 million to 87m. Rolling droughts over most of these years had hit cattle numbers hard, with beef supplies reaching their "tipping point" earlier this year.
"Demand was unusually strong because the US economy has been stronger than expected starting this year leading into the traditional grilling season and meant supply and demand for that product has got distorted." That explained why wholesale beef prices were up 14 per cent even though domestic beef production was down only 6.4 per cent. Large beef cow slaughter last year was now down 14 per cent to 15 per cent and dairy cow slaughter was "up a tad".
In the strong dairying state of California, milk prices were at good levels and culling rates were normal and unlikely to increase that much because corn prices were expected to keep coming down.
About 40 per cent of the corn crop was used for government- directed ethanol production, but that was now back and the latest prediction was for a record corn crop of 14.2 billion bushels. Over the past six to nine weeks the corn price has gone from $4.50 to $3.50 a bushel, which had saved the US dairy industry.
With little culling in dairy herds the shortage of beef could extend to three to four years, with China contributing to demand.
New Zealand bull beef was prized for jerky and other production and the overall beef reputation for quality and food safety was high.
Imported 90CL beef was often mixed with fatty beef for a US market more open to overseas products.
Kay attended the post graduate journalism course at the old University of Canterbury site in the central city before working with typewriters and carbon copy at the Hawke's Bay Herald Tribune and travelling to London in 1978 to write for Farmers Weekly.
He cut his teeth following the meat trade and agricultural policy in Europe for the UK weekly then went to the US to form the Cattle Buyers Weekly, a 3000-word analysis of livestock markets, focusing on beef.