Rabobank’s latest global Beef Quarterly has revised down its global beef production outlook as it forecasts slowing beef demand in a declining economy.
Animal proteins analyst Blake Holgate said covid-19 continues to cause major disruption to the global beef industry and the fortunes of the sector in coming months will hinge largely on the effectiveness of virus containment strategies, consumer reactions and the severity of the economic fallout.
“While we do not expect large changes on the cattle-production side of the global beef industry, ongoing management of the virus and the resulting economic contraction will play out during 2020 and will heavily influence processing and demand,” Holgate said.
Lower processing capacity in New Zealand has resulted in the recent easing of cattle prices.
In mid May cattle prices were down 6% to 15% on last year, depending on the class of cattle and region.
But despite lower processing capacity total beef exports were down only 2% year-on-year for February to April though there was a significant shift in the composition of markets.
“NZ exporters effectively managed the significant market and trade disruption caused by covid-19.”
As Chinese demand weakened product was redirected into markets where demand remained strong, particularly the United States.
A weakening NZ dollar helped average beef export returns increase by 10% year-on-year for February to April.
In the medium-term the expected severe downturn in the global economy will have repercussions for beef demand.
“With economic stress there is risk of a consumer shift to cheaper animal protein such as pork and poultry.
“Many consumers will also shift to less expensive beef and this dynamic is likely to support demand for manufacturing beef, which makes up a significant proportion of NZ’s overall beef exports,” Holgate said.
Meanwhile, the monthly value of NZ red meat and co-product exports for April was largely unchanged from the same month last year, the Meat Industry Association said.
NZ exported $859 million of lamb, mutton, beef and co-products in April but there were changes to some major markets because of covid-19. Exports to Britain were down 27% to $39.6m and Germany was down 30% at $22m.
Exports to China continued to recover, up 16% to $353.6m, with increases for other Asian markets including Japan up 66% at $46.8m and Taiwan up 36% at $36.4m.
Export values of both chilled sheep meat and beef dropped, down 35% to $52.7m for sheep meat with beef down 19% at $30.1m.
Exports of frozen sheep meat were largely unchanged at $300.7m while frozen beef exports increased 16% to $329.7m.
Japan was the stand-out beef market with exports worth $24.4m, up 87%.
MIA chief executive Sirma Karapeeva said NZ has continued to demonstrate adeptness at navigating the ongoing market volatility.
“Our industry is benefiting from the strong and enduring relationships across different markets and this has allowed us to weather the covid-19 storm,” Karapeeva said.
