Changing of the guard in the manufacturing beef market

Blake Holgate, Rabobank

Growing demand for western-style beef consumption in Asian countries signals a potential future ‘changing of the guard’ in the manufacturing beef trade as China, Japan and South Korea increasingly compete with the US for supplies of manufacturing beef on the global export market, according to Rabobank’s latest global Beef Quarterly report.

While the US – with its high consumption of ground beef (primarily for burgers) – has long been the dominant player in the global manufacturing beef trade, the report says China, the world’s largest beef importer, is at the centre of growth in beef trade in general, and manufacturing beef trade specifically.

Many of the cuts imported by China have been to satisfy the local cuisine. But as diets and foodservice change, this now includes a growing trend in trimmings trade, says Rabobank animal protein analyst Blake Holgate.

“Part of this growth can be attributed to the growth in western-style beef focused Quick Service Restaurants. In 2018, McDonald’s opened more than 300 stores in China, taking their total store numbers to 2,800,” he said.

While in the short term China is not likely to unseat the US as the world’s major buyer of manufacturing beef, the increased competition will put upward pressure on global prices.

“New Zealand exporters have benefited from China’s emergence as a serious competitor to the US for manufacturing beef, with New Zealand exporters redirecting an increasing proportion of manufacturing beef away from the US and into China, forcing US buyers to increase their prices in order to secure supplies.”

New Zealand is not alone is seeing growth in the trimmings market, with Australian exports of manufacturing beef also steadily growing over the past four years to China, South Korea and Japan, the report notes.

It also notes that, at this stage, it is not believed demand from Asian markets is such they will set prices, but rather match them to secure supply.

For New Zealand:

For the New Zealand beef sector, the report says, farm-gate prices firmed during April and are now sitting largely on par, or slightly ahead of where they were at in February. This follows  a dip in pricing through February-March when dry weather conditions across large parts of the country resulted in a sharp increase in domestic slaughter supplies. Farm-gate prices are expected to hold firm over the coming months with some upward pressure on prices through the quarter as the seasonal supplies of cattle begin to slow. The number of cattle slaughtered in February-March was 29 percent up on the same two months last season, to have New Zealand’s year-to-date cattle kill up five percent year-on-year. Beef+Lamb NZ is forecasting total slaughter numbers for the 2018/19 season to increase by less than one percent, indicating cattle availability is likely to tighten over the reminder of the season (ending September).

According to the report, New Zealand’s beef exports performed strongly over the first half of the season (Oct-Mar), with both export volumes (up six per cent) , and value (up nine percent) ahead of the same period last season. China’s increasing demand for a wider range of beef products is a key driver behind New Zealand’s increased export returns. For the first half of the 2017/18 season, the US accounted for 42 per cent of New Zealand’s total export receipts and China just 23 per cent. So far this season (Oct-Mar), China is New Zealand’s largest export market, accounting for 36 per cent of exports, with the US accounting for 31 per cent of exports.

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