Despite the impacts of coronavirus China will again dominate beef imports in 2020, albeit at a far slower rate than the heady 60% increase in imported volume last year.
While it’s difficult to predict how long the coronavirus will disrupt the Chinese market, lower sales volumes and limited cashflows will delay a return to normal beef imports in the short term.
With a high inventory of frozen beef unconsumed over the Lunar New Year because of coronavirus restrictions and a significant percentage of Chinese people avoiding eating out entirely, China’s beef demand will be down, Holgate said.
Food service and tourism in China will remain disrupted until the virus is contained with decreased restaurant sales contributing to weaker beef demand in the first half of the year.
Chinese importers also face the extra challenge of limited cashflow from unsold stock at ports and financial losses.
Despite that it’s expected China’s beef imports will continue to grow in 2020 with a strong rebound in the second half of the year but import growth will be lower than seen in 2019.
The slide in cattle prices of 18% to 20% since November is attributed to multiple factors, including coronavirus, which was well in excess of the normal seasonal price decline.
“Weaker-than-expected Chinese import demand in December, after the peak buying period going into Lunar New Year, saw prices start to fall.
“Then prices dropped further in January as supply chain disruptions in China caused by coronavirus came at a time when NZ farmers were looking to offload an increasing number of cattle due to drying weather conditions, substantially increasing domestic supply levels.”
The price decline put North Island bull and steer prices at $4.80/kg carcase weight in mid February.
That leaves bull prices starting to fall behind where they were at this stage last year and prime prices well below last year’s levels.
Holgate expects the longer-term underlying shortage of animal protein in China will ensure demand for NZ beef will recover once coronavirus supply chain disruptions have been resolved and the existing inventory in the country is distributed.
“The exact timing and degree of this recovery will depend largely on how the spread of the coronavirus is managed.”
The Chinese market aside, NZ processors can redirect volumes of manufacturing beef into the United States market where demand remains solid.
For prime cuts though, NZ exporters will have greater difficulty finding alternative markets to China, facing stiff competition from Australia and the US in potential options such as Japan and Korea.
The continuing impact of coronavirus and high levels of domestic cattle supplies because of low feed levels have potential to put further downward pressure on prices over the next month, Holgate said.
