Saturday, April 13, 2024

Mixed fortunes ahead for red meat

Neal Wallace
Beef prices improve, but sheepmeat is still lagging.
Sheepmeat export volumes overall in April were up 10% to 38,627t but their value was down 2% to $393 million.
Reading Time: 2 minutes

Meat exporters say prospects for beef prices this season are starting to improve but warn a lack of consumer confidence continues to temper demand for sheepmeat.

Alliance sales and marketing manager Shane Kingston said Chinese demand for sheepmeat is recovering slower than anticipated following the lifting of covid restrictions.

Affco sales and marketing manager Derek Ramsey said he has noticed small glimmers of optimism in China but said consumer confidence and demand remain low by historic standards in all key markets, especially for sheepmeat.

Silver Fern Farms chief supply officer Dan Boulton said there have been “some small signs of life for lamb out of China”, but conditions elsewhere remain gloomy. 

This is due to cost-of-living pressures, high inventories and increased production out of Brazil and Australia in particular.

“This is playing out particularly for lamb, but we’re cautiously optimistic that prices have bottomed out for beef,” he said. 

“While there are a few nerves in the market around venison, it is still performing relatively well on volumes and pricing.” 

Ramsey said Chinese consumers are not spending, concerned at high youth unemployment and a weak real estate market, which the government has been trying to address through stimulus packages. 

“It is not going away. It is still a massive economy, it has just lost its confidence,” Ramsey said.

Sheepmeat cuts such as French racks are performing well in the United States but demand overall is flat, as it is in the United Kingdom and Europe.

“It’s hand-to-mouth as they try to recover losses.”

The one redeeming aspect is that New Zealand sheepmeat production is at a low.

“The test for NZ will be when we ramp up production. Will markets take product at the price we want?”

A further factor is Australia’s record sheepmeat exports.

Volumes of mutton alone are 68% higher than a year ago and if forecast dry conditions materialise, farmers could dig deeper into their flocks, accentuating the excess supply.

Ramsey said Affco has been diverting product to alternative markets and doing what it can to maximise returns.

Kingston said persistent high inflation, which is reducing discretionary spending, is putting pressure on global demand – and this has pushed prices below five-year averages.

“This has led to a decline in people eating out in restaurants and some shoppers trading down from higher priced red meat proteins such as lamb.”

Inventory levels for all protein are high, which is reducing demand for fresh product, although Kingston said Alliance stocks are lower than in previous years.

Rabobank senior animal protein analyst Angus Gidley-Baird said demand is soft in global beef markets, other than the US.

According to the bank’s quarterly report, global cattle prices are split into two distinct groups, those in North America and Europe, and the rest of the world.

Declining supply and strong consumer demand in the US is driving cattle prices higher, while low domestic beef supply has helped prices in Canada and Europe.

Elsewhere, prices are soft due to weak market conditions.

Gidley-Baird said US cattle prices have increased almost 30% in the past 12 months, whereas Australian cattle prices have fallen by more than 30%.

“This price split is the largest we have seen in the past 10 years,” he said. 

“Such a separation in prices will have consequences for beef exporters’ competitiveness, and we expect to see some shift in trade volumes as a result.”

Boulton said the US will be key in the recovery of beef prices, and he expects demand to rise towards the end of the year.

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