ANZCO Foods Market Update – March 2024

A shorter than normal version of my market update this month, reflecting the fact that very little has changed over recent weeks.

As expected, China has retreated into its shell since the end of the New Year celebrations. The market remains tough with high levels of in-market inventory and poor consumer sentiment proving to be an ongoing challenge for exporters of both beef and lamb.

In Europe and the UK, it has been interesting to watch the rapid rise in livestock prices for UK and Irish lamb. Of course, they are just coming out of the depths of winter over there and lamb volumes are at a seasonal low, but numbers appear to be even less than what has historically been the case – a sign of the ongoing challenges facing the UK industry due to the uncertainty of post-Brexit life for the farming sector. In addition, with both Ramadan and Easter hitting in the same window, there has been a rush of demand, notably on the continent. We are seeing a large number of whole carcasses being sold into the halal butcher trade, which is a perfect fit for UK and Irish processors that are bleeding under the weight of the livestock prices of over GBP8/kg. This spike in short term consumption in Europe is certainly increasing the number of inquiries we are receiving for both chilled and frozen lamb. While our ability to meet spot opportunities is limited due to the length of our supply chain, the hope is that once we come out the other side of both holidays, there will be a new line in the sand set for general pricing that we can start to work off and see improved returns as we head into Q2.

Japan’s lacklustre demand for both beef and lamb remain an ongoing concern. We are starting to see a seasonal uplift in inquiries as the first sign of warmer spring weather appears, but beyond that there seems to be very little confidence in the short to medium term outlook from our customers in both retail and foodservice channels.

The shining light remains the US. For both beef and lamb, we are seeing increased demand for New Zealand product and prices are reacting accordingly. As I noted in my last report, our goal is to keep our powder dry as much as we can to ensure that we capture as much value before the seasonal ebb in livestock numbers starts to impact our plants. We are probably slightly ahead of where we expected prices to be as of today, which bodes well for the general direction of travel. As I also alluded to in my last report, a rising tide tends to lift all boats, so a firming US market will inevitably force other markets to join the party and it is clear customers around the globe are watching the US situation very closely. The only cloud on the horizon in the US is on the demand side. The current market dynamics are all driven by domestic supply, or lack thereof. In terms of domestic consumption, US consumers continue to be wary of higher foods prices, with beef right at the top of the list, both in terms of visibility and the actual rate of increase that is being experienced. That continues to have an impact on consumers trading down from premium cuts and also trading away to cheaper proteins such as pork and chicken. We certainly don’t want to get in a position where firming prices for imported beef starts to burn off end-user demand, but that would be a nice problem to have in many respects and we can get more worried about that risk in due course. In the meantime, it will be important for New Zealand exporters to strategically manage their product and customer portfolios in the US, as this will be an essential part of ensuring sustainable returns for both ourselves and farmers as we look ahead to next season.