Saturday, March 30, 2024

China a key driver in NZ meat exports

Avatar photo
The beef trading environment is becoming increasingly dynamic with current fundamentals looking to offer opportunity for the New Zealand beef industry.
New Zealand’s products are a perfect match for China’s food security policy.
Reading Time: 3 minutes

The Beef + Lamb NZ Economic Service team has examined the key influences in China that are impacting, or have potential to impact, demand for NZ sheepmeat and beef exports.

Findings show global red meat trade headlines are increasingly dominated by demand and supply patterns emerging from China, which has become a key driver of global trade flows and prices for meat protein.

China was the largest importer of both beef and sheepmeat in 2020, buying $36 billion of imported meat, 47% of the global total.

Both sheepmeat and beef exports to China accounted for 5% of the total NZ merchandise revenue in 2019-20, with 50% of sheepmeat and 36% of beef exports shipped to the China market.

The importance of China as an export destination for NZ sheepmeat and beef means that the supply chain, including farmers, processors and the NZ domestic market, is sensitive to changing demand and supply patterns in this market.

The Economic Services team says interpreting China is challenging as not only is it incredibly dynamic and developing rapidly, but information and data collection on market trends is scarce.

A surge in protein demand and imports from China saw imports reach all-time highs in the first quarter of this year, with retail prices for sheepmeat up 9.4% and beef up 4.1% on last year, the highest since April 2010.

While the outbreak of African swine fever is seemingly the most significant factor for the surge, there has also been a shift of more consumers into the middle-upper income brackets, with the increased wealth leading to greater consumption of higher-quality meat proteins.

Into 2021, demand has also been supported by the Chinese government’s focus on economic growth post-covid and the recovery of the foodservice sector demand as the covid vaccination rolls out.

A tightening of global supplies of both beef and sheepmeat are contributing to the optimistic demand outlook for China and key markets.

“There is plenty of speculation regarding who can fill the emerging gap between global beef supply and Chinese demand in 2021,” the Economic Services team said.

Limited supplies of both beef and sheepmeat from Australia were expected.

What has been unexpected for global beef trade is the drop in production from Brazil, evident in the first quarter of 2021, and the sudden 30-day suspension of Argentine exports, including China.

Argentina and Brazil together accounted for 61% of China’s beef imports in the first quarter of this year.

The US is now constrained by the Chinese requirement for cattle to be free of ractopamine, a feed additive widely used in the US to support grain prior to finishing.

US beef exports are also at the higher-quality end and will not fill the gap left by the lower cost South American beef, of which there are still unanswered supply questions that may minimise China’s supply shortage.

There are reports of Brazil importing lower cost beef from Paraguay to meet its domestic market requirement so it can continue to supply the higher-value export market, while Argentine beef producers are understood to have negotiated with the Government for a portion of beef exports to resume under a new quota system.

“But the timeframe and potential impact this will have on beef supply remains unclear at this time,” they said.

“It is clear that the beef trading environment is becoming increasingly dynamic and currently the fundamentals of the market favour exports offering opportunity for NZ beef farmers and exporters.”

Historic highs for NZ lamb and mutton farm gate prices, combined with tight global supply of sheepmeat, are driving optimism for this sector.

While farm gate prices for beef are yet to respond in a similar pattern, the uncertainty around future supply for 2021 is expected to result in strengthening winter prices and a strong start to new season pricing for beef farmers, the team reported.

Total
0
Shares
People are also reading