Rabobank’s protein analyst Blake Holgate says lower demand from foodservice will hit export returns, but he expects prime cattle and sheep prices in the coming season to trade within a narrower band than traditionally, but consistent with the five-year average.
However, that forecast comes with several provisos.
Holgate says in an interview that risks include the lingering presence of covid-19, the virus forcing economies to stay closed or restricted, the value of the NZ dollar staying high and geopolitical tensions.
Shrinking foodservice demand has been partially compensated by stronger retail sales, as government stimulus packages boost the income of consumers.
Holgate says questions remain about the impact on demand when that stimulus ends.
In Rabobank’s latest report, Global Animal Proteins Outlook 2021, emerging from a world of uncertainty, Holgate says demand from the US and China will underpin returns to NZ farmers.
“Reduced demand for higher-value cuts will pull NZ beef export returns back from the record highs of quarter four last year,” he said.
“However, we anticipate solid demand for NZ beef out of the US, particularly for manufacturing beef, and China will underpin returns for NZ exporters in 2021.
“Robust Chinese demand will also play a key role in holding up NZ sheepmeat prices in the coming year, as will strong global retail demand and tight lamb supply here and in Australia.”
Beef production is forecast to be flat, while the long-term trend of declining NZ sheepmeat supplies continues due to climatic impacts.
Global animal protein production is expected to grow, driven by the recovery of China’s pork industry following an African Swine Fever (ASF) outbreak, and will be the single biggest driver of change.
“In the year ahead, we expect to see pork production grow faster than any other species, largely because of the recovery from ASF in China and Vietnam,” he said.
The global production of poultry, aquaculture and beef is forecast to grow, while wild-catch seafood production is expected to decline.
China’s relationships with its trading partners and Brexit are two key trade issues for the coming year.
Holgate expects China’s political relationships with its trading partners to increasingly influence its sourcing and to see moves to improve food security and cost.
“With the UK and EU yet to finalise a new trade deal, some of the post-Brexit scenarios include a potential surplus of pork and beef in the EU, an increase in meat prices in the UK and a new sizable, high-paying destination for animal protein exporters around the world,” he said.
Disruption from the covid-19 pandemic is expected to result in change.
“These include accelerating trends such as reduced labour availability and the rise of e-commerce, as well as trend reversals, such as a shift to a sales focus on local consumers rather than exports and the impacts of the economic downturn,” he said.
Businesses are expected to focus on building resilience, investing in agility and building trust with workers, regulators, suppliers and consumers.
Despite some doubts, Holgate says most consumers still prefer to eat meat, but that will only be maintained if animal protein supply chains proactively reduce emissions and improve their sustainability.
He identifies three key steps needed to progress sustainability.
“Firstly, an improved definition of sustainable animal protein will need to be developed,” he said.
“Secondly, introductory price signals will be required to speed the commercialisation of technologies to reduce greenhouse gas emissions without reducing production.
“And finally, improved access will be needed to timely, cost effective and accurate tools that measure sustainability performance.”
