Growing Chinese demand boosts New Zealand beef outlook - Rabobank
Contributor: Fuseworks Media
via Voxy.co.nz - 9 August, 2019
Continuing strong growth in Chinese demand for New Zealand beef is set support solid returns for the nation’s beef producers over the coming year, according to Rabobank sustainability and animal proteins analyst, Blake Holgate.
Speaking on a recently-released podcast New Zealand Beef - Mid-year Outlook, Mr Holgate said beef prices were now in line with the previous season and the pricing outlook for the next 12 months was encouraging.
"Strong global beef supplies saw early season prices for New Zealand beef come under pressure, however, since then, very strong demand from China, a significant recovery in US imported beef prices and slowing domestic supplies has culminated in a healthy price recovery to a point that is largely in line with last year’s pricing levels," he said.
"With demand out of China and the US set to remain firm and the NZD/USD exchange rate favourable for New Zealand exporters, we’d expect there to be some upside to pricing in the remainder of the season and for schedule prices to at least match last year’s highs."
Looking out over the next 12 months, Mr Holgate said beef prices were expected to remain elevated.
"Over recent years, beef prices have operated in a reasonably narrow range with global supply growing steadily at around two to three per cent, driven largely by increased supply out of the US and Brazil, and beef consumption rates lifting by a similar level, as economies around the globe continue their economic recovery from the GFC," he said.
"However, I don’t think there is much doubt the impact of African Swine Fever (ASF) on Chinese pork supply will increase beef demand out of China over the next year and tip the balance towards a supply shortage," he said.
"This shortage will continue to put upward pressure on beef prices over the coming year and should ensure prices remain at, or above, the five-year average prices."
While Mr Holgate said New Zealand beef prices were likely to remain strong, he was less convinced this should be viewed as evidence of a significant fundamental upward shift in beef prices.
"Global beef production will continue to grow over the coming year, driven mainly by the US and Brazil, while producers of competing proteins like poultry, seafood and pork are also likely to increase their production in response to price signals due to ASF," he said.
"In addition, we’ve recently seen the China Meat Association announce that China’s government would be expanding its sourcing of animal protein products in an attempt to replace the lost pork production that has resulted from ASF. This may include allowing imports of Indian buffalo and lifting the current ban on UK beef. There are also reports of an increase in the number of international meat facilities being accredited for export into China."
"And these factors will mean there is likely to be a noticeable jump in global protein production outside of China in 2020, which could limit the upside for beef prices in 2020."
NZ’s increasing reliance on China ...