While there will be challenges the crisis presents a chance for the sector to reposition agriculture in the eyes of the public, government and future talent, Holgate told farmers in a Beef + Lamb Farming for Profit webinar.
As global economies founder in the wake of covid-19 there are factors that will cushion the blow for red meat producers.
They include a softening NZ dollar, the ability of the red meat industry to shift supply quickly as opportunities arise, the continued impact of African swine fever on protein stocks in China and globally tight supplies of lamb.
“We will see prices ease rather than see a significant decline but this is still a fast-moving situation.”
But red meat producers and processors hit the covid-19 crisis in good shape.
Commodity prices were performing well and processors had reduced debt, driven by the strong emergence in recent years of China as a new market.
With China now NZ’s predominant export market the relationship, despite concern of too much reliance on one market, might prove to be particularly beneficial in the next year.
While the global economy grew solidly at 3-4% in recent years economists had signalled a slowdown even before covid-19.
Holgate said the economic damage is not the disease, it is the containment efforts and they have both immediate and long-term implications.
February saw a 54% decline in red meat shipments to China compared to the previous year and in March that was reduced to a 25% cut with shipments expected to show an increase again for April.
Product was diverted to Europe, the United States and secondary Asian markets in February and value was retained but as other parts of the world have shut it is the high-value cuts destined for the food-service sector that have taken the biggest hit.
Panic buying and the reduction in eat-out options have not entirely offset the loss of spend in the food-service sector becausse with supply chain and packaging issues it is not easy to switch products between retail and food service.
“It’s the cuts rather than the product that has been impacted.
“We are struggling to keep up with demand for the lower-value cuts while demand for primal cuts has nosedived.”
Unfortunately, demand and price strengthening of the lower-value cuts are unlikely to offset the drop in value of the primal cuts, Holgate said.
B+LNZ said, in a farmer update, despite the covid-19 market disruption the sector’s exports have continued, surpassing $1b in March, a record for monthly exports.
The robust March performance is underpinned by strong trade networks and customer relationships, enabling products to be shifted to other markets when supply chains have been interrupted.
The strong results have helped offset the increased costs farmers and companies have faced because of covid restrictions.
The sector is underpinned by strong fundamentals and is therefore well placed to get through the volatility, B+LNZ said.
Initially, the impacts cut the value of exports to China by 45% to $175 million compared to February 2019. Despite the disruptions, export data shows successful market diversification with increases in exports to other markets, including North America, Japan, Taiwan, Malaysia, the Middle East and Britain.
As China flattened the covid-19 curve and began to tentatively reopen the economy there has been some recovery in demand with export volumes of lamb to China lifting 105% in March and beef exports to China lifting 54% in April.
As covid-19 spread globally NZ red meat exporters experienced similar challenges in other key markets, including the US.
Over the next couple of months it is expected the Chinese market will continue to cautiously recover while demand and supply chain issues might affect exports to other large trading partners such as Europe and Britain.
Already that is playing out with European Union sheep meat imports from NZ down by 28% in April compared to last year.
Some countries have introduced protectionist measures such as export prohibitions and restrictions creating extra complications and uncertainty in the trading environment.
That protectionism creates volatility and adversely affects supply, prices and food availability.
To date it has not impacted red meat but it is something we are watching very closely, B+LNZ said.
