That is supported by a strong start to the first half of the season and an expected weakening of the New Zealand dollar.
While the drought and covid-19 have both had impacts for farmers and meat processors the fundamentals look likely to remain strong for sheep meat and beef exports this year, Beef + Lamb chief economist Andrew Burtt said.
“Red meat is expected to remain a key component of many diets as African swine fever in China continues to drive a shortage of pork there, which underpins solid demand for beef and sheep meat imports.”
Export receipts for beef, veal, lamb and mutton including co-products like offal, meat-and-bone meal and hides and skins are forecast to total just under $9 billion.
Beef export receipts are expected to pass $4b for the first time, lifting 18% to $4.6b.
A lift in the average export value for lamb offsets a lower lamb crop in 2019, resulting in a 4% lift in total lamb export receipts to $3.54b.
Throughout covid-19 the red meat sector has proved remarkably resilient, Burtt said.
But AgriHQ analyst Mel Croad cautions the need to read past the headlines after a significantly weaker start to 2020.
“As noted in the report we can expect significant short-term volatility in market demand and prices.
“We need to remember there will be an economic toll in key markets for the balance of this season,” Croad said.
For many this year’s income is almost all in the bank.
“We were so fortunate to lock in those record prices at the farmgate through the opening months of the season, be it for store or slaughter.
“We have suffered a significantly weaker start to 2020 and while we are seeing some marginal upside we still have a long road ahead of us and we are now starting from a much lower pricing point, especially for lamb.”
Croad is sceptical of the report’s heavy reliance on China and ASF being the silver bullet to pull market demand and prices back up on the basis of greater need for proteins.
“Yes, there will be some benefit but since covid-19 we have yet to see anything measurable in this space.
“Demand from China is improving but still a long way from where it has been and where it was this time last year.
“In fact, some in-market prices for lamb into China have actually reduced in recent weeks,” Croad said.
The mid-season report does acknowledge covid-19 disrupted an incredibly strong start to the 2019-20 season.
Chinese demand for NZ’s red meat exports was severely curtailed during the second quarter of the season and the human and economic toll of the virus in both Europe and the United States will affect demand for red meat exports for the rest of the season with significant short-term volatility in market demand and prices expected.
But, despite the disruption, demand fundamentals from China remain solid with Chinese 2020 pork production expected to be down 40% on pre-ASF levels.
Last year Chinese consumers increasingly turned to sheep meat and beef as alternatives to pork.
As economic activity recovers following covid-19 demand for meat is expected to similarly recover.
Shifting market access dynamics could change the distribution of beef exports this season.
The US is forecasting a significant lift in beef exports and has gained improved market access to China and Japan though US exports have been significantly affected by covid-19 becaue of the closure of meat processing plants.
The report notes that might increase competitive pressure for NZ beef in some markets but could create opportunities in others.
Brazilian beef has recently regained access to the US market, increasing competition there.
However, a significant reduction in Australian sheep meat and beef production will provide some support for demand for NZ red meat in key markets, B+LNZ said.
