ANZCO Foods Market Update - August 2024

There has been very little change across global markets since my last report in July. Supply dynamics continue to drive demand for our product with consumption remaining relatively weak.

The US remains the focal point for New Zealand beef exporters, however the surge in pricing that some commentators had predicted last month has not eventuated. While US domestic supply continues to tighten and prices increase, the price for imported beef has remained relatively flat. This has been largely due to the volume of Brazilian and Australian beef that is flowing into the market. The Brazilian volume in particular is an outlier to what we would normally see in the US at this time of year, given that they are forced to pay tariffs of 26% on that volume that would usually make little economic sense. However, the one downside of the current operating environment is that we do not have a second market competing for that beef. In an ideal world, China would be in a steady state and pricing would be competitive, but with China well behind the market, it means that there is not that same degree of competitive tension that we would like to see, hence why everyone is focused on supply into North America and hence why our ability to maximize value, at least in the short term, is adversely impacted.

Domestic beef pricing in China continues to be factor in the generally poor market conditions faced there. Recent numbers have highlighted that the average price of domestic beef is down 16% year-on-year, with availability well up. This shouldn’t be on an ongoing issue, but only adds to the challenges we face finding good value homes for New Zealand product. Likewise on lamb, domestic Chinese supply is abundant currently given the time of year. With our own lamb supply at seasonal low levels, we can manage things reasonably well, but all eyes are on the important pre-Chinese New Year demand window, particularly with the lunar holidays earlier than normal next year, meaning that the relevant shipment period also pushes forward and is coming ever closer with each passing week.

The recent and sudden appreciation of the Japanese yen is in theory a positive sign for demand for imported beef demand, allowing our product to be slightly more competitive versus poorly priced domestic product. As yet, however, we have not seen any real change in market sentiment or inquiries from our major customers. In general, the market remains weak driven by poor consumption. Lamb demand into foodservice has shown slightly more positive signs of life however, largely driven by the increase in summer tourist numbers, both domestic and international, notably in the northern island of Hokkaido. Retail demand for lamb on the mainland however remains subdued, and the systemic issues within the economy and with consumer confidence will continue to impact our business there for the foreseeable future.

The UK and Europe are in the last throws of their summer vacation season and the market is very quiet as a result. UK and Irish lamb prices seem to have settled at their seasonal low, but there remain concerns around the level of supply as we look ahead to the next few months, which is a positive. Of course, we too have very little to supply as we look ahead to the balance of 2024, given the national livestock position on lamb, so we will struggle to take advantage of any short-term opportunities, but nonetheless this tightness in supply should be beneficial in terms of driving prices higher as we look ahead to new season lamb coming on stream. Anecdotal feedback from our partners in France is that the Olympic games have not provided the boost in sales within the foodservice sector that many had hoped for or been relying on. While visitor numbers have been strong, the general economic environment means that the limited pool of money has been spent on travel, hotels and event tickets, with eating out apparently well down the list of priorities.

In summary, it’s business as usual as we work our way through the last weeks of winter. We are facing a challenging August, September and October in terms of livestock numbers across all categories, so we will need to micromanage our plants, supply chain, and customers to piece together the jigsaw puzzle that we will be presented with in the coming weeks.