The Chinese need for protein will push up both demand and thus prices there and for other customers.
Pork is easily the number one meat protein in China and research indicating the swine fever impact could create an 8.2 million tonnes gap in total protein supply there this year.
Imported pork is expected to make up just over half of that gap.
But the shortfall could continue for the next two to three years at least, Petersen said.
China is combing the world looking for pork.
NZ can’t supply that but the pork woes have boosted demand for other proteins.
“There’s no doubt the incredible demand we’re seeing from China for our sheep meat and beef is due in part to African swine fever,” Petersen said.
“There’s a lift in demand for all cuts, all product ranges.”
That demand is underpinning world prices, which will also have to be met by other markets.
The disease has been in China for the last eight months and has spread to neighbouring countries.
Petersen is surprised the reaction to it has been as low as it has for so long.
“We’re seeing a massive shift in demand for protein and China is licensing processing plants in Europe and all round the world, so it’s not just NZ.”
The scale of the Chinese protein shortfall referred to by independent analyst Simon Quilty in Australia is vast when compared to total NZ production, with beef at about 560,000 tonnes a year.
Petersen didn’t want to estimate a possible level of sheep meat and beef price rises but noted Quilty’s comment Chinese hog prices have jumped 25% in recent weeks.
“That’s why I say hang on for the ride because we are seeing a pricing shift and that strong demand growth can quickly come back to the NZ farmgate.
“It will be exciting but there could be speed bumps along the way.”
Quilty said mutton imports into China rose 57% last year and lamb imports were up 10% and there is no reason why that trend won’t continue. The Chinese buy of pork in the United States is likely to be the largest protein-buy programme in the history of US pork exports.
NZ farmers sold a lot of older ewes into that mutton rally at good prices, providing a major boost for farm viability, Petersen said.
He doesn’t expect farmers to kill more capital breeding stock but they will breed from hoggets and keep more ewe lambs as they cull older ewes.
“At $7/kg for lambs it’s an incredible time to be farming and it’s the same for beef.
“Farmers can be confident for this calendar year.”
He thinks the Chinese situation will bring gains mainly for frozen product because there are still challenges with chilled and supply chains there but there will be chilled opportunities as well.
Quilty said the improvement in the US prime beef market will rely on global displacement with greater exports into China from NZ, Australia and Brazil while the US will be the backfill in Japan, South Korea and other key beef markets that compete directly with China.
It will take another six months before the full effects are seen in the US domestic beef market.
However, he expects more rapid price rises in the manufacturing beef market because of the strong price relationship of some beef trims to pork trims, especially if the Chinese pork-buying tightens domestic supply.
Manufacturing beef prices have already risen significantly in the US in the last three weeks.
NZ exporters have achieved very good results in adding value to meat cuts in recent years and have only to keep the trend improving.
He is sure they will be careful not to rely too much on one market. They know from experience the NZ industry does best when it has the widest market diversity it can achieve.
ASB Bank says China’s share of NZ’s lamb exports has increased from 18% in 2014-15 to 29% this supply season and for beef the increase was from 10% to 36%.
The rising middle class means more Chinese can afford expensive steak and lamb cuts.
And the pork shortage and price increases mean many people will turn to other meats such as beef and lamb as substitutes, ASB said.
