New Zealand’s beef industry faces brighter prospects in 2014 with strong international demand, combined with tight local supply, according to a new report released by agribusiness banking specialist, Rabobank.
The report, Beef in 2014: Demand bright, local supply tight, says the decline in beef production, particularly in lean beef, in the United States – New Zealand’s largest beef export market – means New Zealand product will be in demand.
However, the Rabobank report cautions, in other less traditional markets – where cost is the primary determinant – growing competition from India should be expected, with increased local Indian supply available for export.
Report co-author, Rabobank animal proteins analyst Matt Costello says, New Zealand’s beef sector will be hoping for increased returns in 2014 as supply tightens domestically and global beef demand remains strong.
“New Zealand beef production is expected to be lower in 2014 compared to the drought-affected production of 2013,” says Costello.
“Improved seasonal conditions in the second half of 2013 has helped turn around the fortunes since the peak of the drought and has set things up for an improved spring and summer for 2013-14. The overall increase in processing levels through 2013 was the direct result of a high cow kill, as more cows were carried over from 2011/12 due to favourable pasture conditions in New Zealand.”
Costello says New Zealand’s beef production is likely to be limited due to the expansion of the dairy herd, although beef cattle numbers are not expected to decline greatly in the coming years. The rapid incremental growth in dairy numbers witnessed over the past decade is expected to slow as pressure from suitable land availability and increasing emphasis on environmental regulations grows.
Competitor watch in 2014
Exporters will see increased interest from the US while increasing competition from India will likely limit growth in exports to a number of South East Asian and Middle Eastern markets.
Costello comments that although beef supplies from New Zealand are expected to tighten in 2014, total beef production globally is forecast to remain relatively steady compared to 2013.
US hungry for beef
The US will experience a significant decline in beef production in 2014, the report says.
“The urgency to rebuild the US herd is becoming ever more pressing due to the ongoing liquidation occurring over the past three or so years,” Costello believes.
“If weather permits, US producers will need to grow cattle numbers which are now at 60-year lows. With tight US supply forecast for 2014, this will help drive strong demand for New Zealand product.”
Indian buffalo meat exports to remain strong
Increasing exports of Indian buffalo meat in 2014 will target South East Asian markets, according to the Rabobank report.
After becoming the world’s second-largest bovine exporter in 2012, the growth in the Indian buffalo meat shipments continued throughout 2013, increasing four per cent, or 22,000 tonnes shipped weight, in the first six months of 2013, Costello says.
“Of particular importance, is India’s continued push of buffalo exports into markets such as Vietnam and Thailand presumably through grey channel for re-export to China.”
Asian market dynamics
Despite competition from the US for New Zealand product, exports to China are forecast to remain strong in 2014 as China will continue to face a supply deficit, creating strong demand for imports.
Rabobank expects Brazil to regain formal access to the Chinese market in early 2014, which will give China the opportunity to diversify its supply base. New Zealand currently accounts for 18 percent of China’s formal imports.
Rabobank supplied material.