Meat exporters are looking at the coming meat export season as “something of a mixed bag,” with strong demand, lower supply and good prices generally for sheepmeat, but combined with uncertainty at the commodity end of the beef market.
In its latest annual report the Meat Industry Association (MIA), the sector’s trade body, notes the new season – which started on 1 October – has been underpinned by the sector’s “positive performance” in 2017-2018 which saw $8.1 billion of New Zealand’s red meat products exported to 120 countries (see highlights, at the bottom of the page).
The forecast for the coming season from Beef + Lamb NZ’s Economic Service is for a slight decrease in lamb, mutton and beef available for export but for prices to remain firm at historically high levels, helped by a weakening New Zealand dollar and strong export demand.
Beef exporter Greenlea Premier Meats’ managing director Tony Egan, sees the coming season as “something of a mixed bag,” for the Hamilton-based family company.
“We have evolved a lot in recent years and now have some highly customised specifications which can hold their value well,” he says.
“This is particularly the case in markets like China and South-East Asia, where Greenlea has strong brand recognition and long-established marketing channels. These markets all look good for many years to come.”
This view is echoed by Simon Gatenby, chief executive for sheepmeat and beef processor and exporter Taylor Preston, based in Wellington. He sees most of the world markets performing well too.
“China, South-East Asia and the United States are all looking for more product,” he says.
Demand is generally still positive for ANZCO too, where lamb and mutton demand remains generally solid, says Rick Walker, general manager sales and marketing.
“We’re getting very good pricing for sheepmeat generally and we don’t see that changing significantly over the course of the season.”
Watching for signs of lamb demand “burn-off” in Europe
However, Walker points to what he sees as the only challenge with lamb, the very high prices historically.
“Livestock prices are forcing us to push prices as hard as we can in markets,” he explains. “We have been fortunate in that supply has been relatively tight, which means that customers have had very little choice over being willing to pay those very high prices if they want the material. But things can change very quickly in the commodity markets and we’re certainly watching for signs of demand burn-off in some of our more mature markets, such as the European Union and UK.”
Gatenby also says while the EU is “OK” for Taylor Preston, he is, “a bit nervous about the heights lamb and mutton pricing has reached there – they have the added distraction of Brexit to put in the mix as well. “
Walker sees continued growth in demand for ANZCO’s sheepmeat products in China, now New Zealand’s largest sheepmeat market, where he says it is going to be increasingly important for us to build relationships and a customer base in that market.
He is also very positive about customer demand for mutton in China over the coming 12 months.
“We think pricing will be very stable from where it was last season and, although there are some challenges, buyers are still very focused on demand for the Lunar New Year and we expect those buyers to be very active in the last part of 2018.”
“Dark clouds” for beef
There are more “dark clouds on the horizon” for beef than for sheepmeat, however. Both Walker and Egan sounded concern over general supply and demand imbalances for beef, which they say will be more of a challenge for the meat business in the coming season.
Uncertainty is being generated at the non-differentiated or commodity end of the global market, especially in the US, explains Egan. Both he and Walker referred to the sizeable inventory of grinding beef in the US to work through. US and Australia’s drought conditions, which are leading to increased supply out of that market, have further exacerbated this situation, he says.
“However, the lower New Zealand dollar has helped to offset these lower commodity prices,” he says.
Meat companies will be keeping a close eye on exchange rates in the coming year, especially the US dollar, the currency of trade for the majority of New Zealand exports. Fluctuations – which will be outside their control – will have an impact on returns received by the exporters and their farmer suppliers.
“The overall geopolitical environment doesn’t lend itself favourably to increased trade and pricing of beef over the coming six months, particularly in relation to the Chinese/US situation,” adds Walker.
Tony Egan believes this mixed market outlook will form the backdrop for beef for the next few months.
“The flow-through effect to farmers will depend on how much pain the processors absorb to get underway and how much they choose to pass on … a cut-throat business all round!”
FTAs not keeping up with development of further-processed product
Gatenby agrees the major challenges ahead are in the political realm, both in-market and domestically with Emissions Trading Scheme and industrial workforce reform, but also in regulatory areas.
“In my view, our international trade agreements have not really kept up with the development of our further processed product,” he says, giving the example of lamb shanks sold to the EU in quota with no tariff.
“Those shanks are then cooked in the EU and sold as ready meals or in pub chains,” he says. “However, if we cook shanks here in New Zealand and then export to the EU there is a tariff of 12.8 percent rather than a quota – so, effectively, we have to compete with our own product.”
Opportunity in China says ANZCO
Walker sees opportunity for ANZCO around driving China, “from a volume growth perspective, but also value” and looking to leverage the chilled beef and lamb access that has been enabled through the licensing of specific New Zealand plants by the market.
ANZCO will be working to be part of the growth of that premium end of the market in China and also leveraging the very strong position in Japan, especially for lamb, to continue to drive as much value out of that market as well, he says.
Grass-fed the way to go
Both Gatenby and Walker also see major opportunities for New Zealand’s grass-fed label, particularly for premium beef product, which is continuing to gain ground, especially in the US.
“We see New Zealand as the natural owner of grass-fed, so we need to position ourselves to supply a good range of those items, including further-processed items such as mince and burgers to convince the Americans that the green stuff we have down here is what animals actually like to eat!” says Gatenby.
“ANZCO will be implementing strategies in the US to make sure we are more active and leveraging the work that Beef + Lamb NZ will be implementing over the next 12 months in the Taste Pure Nature programme to help us drive our brand value,” says Walker.
Presenting to the world
Taylor Preston is one of a small number of New Zealand meat companies getting ready to exhibit this year at the massive international food fair SIAL in Paris between 21-25 October.
“With a joint-venture company in France – NZ Direct – we see it as important to support our French partner and we always get some value from it for ourselves,” says Gatenby.
Other meat companies will also be sending representatives to the fair to meet trade contacts from around the world.
The red meat sector also plans to be well represented at the upcoming first China International Import Expo in Shanghai, China, from 5-10 November, with an MIA delegation at the event and associated trade forums and functions.
“This large showcase for China has been instigated by the president of China Xi Jinping and we will be there in support of our growing relationship with this important market,” says Egan.
Silver Fern Farms and ANZCO are amongst other firms preparing to exhibit their products at the event.
It will be an interesting season ahead.
Red meat trade highlights 2017-2018
- Over $8.1 billion of sheepmeat, beef and veal was shipped to 120 markets around the globe – a lift of $1 billion, or 15% on the previous year
- “Stand-out performer” was sheepmeat exports, which hit a record $3.4 billion – up 24%
- Beef exports increased 9% to $2.9 billion.
- Co-products lifted 7% to $1.5 billion.
- China was the top earning individual market for sheepmeat ($933 million)
- Europe continued as the cornerstone market for high-value chilled lamb cuts ($583 million)
- The number one market for beef was the US ($1.2 billion)
- China overtook Italy as the top market for hides and skins ($139 million)
Source: The MIA 2017-2018 Annual Report, which is available for download at www.mia.co.nz.