ANZCO Foods Market Update - November 2023

We remain in a challenging environment when it comes to maximising the value of ANZCO’s beef and lamb products across global markets.

In my last report I noted the concerns that are growing in the US as Australian manufacturing beef starts to flow into the market. This continues to be the case and prices are flat to softer as a result. We have done well in terms of our sales profile and are able to watch market developments unfold during the coming weeks as opposed to having to find short-term homes for product, but at some point we’ll need to dip our toes back in the water and it may well still be a bit chilly when that time comes, particularly with the expected influx of Brazilian beef come January and the opening of their annual quota access, which they’ve looked to fill as quickly as possible in recent years.

Our CEO, Peter Conley, was back in China this month with an industry delegation, following our own trip in early October. Unfortunately, his general feedback was that market sentiment had got worse rather than better during that relatively short period. Obviously, that does not bode well as we look towards Chinese New Year 2024. Essentially nothing has changed in China. Customers are struggling to move high levels of in-market inventory, weak consumer confidence is having an adverse impact on the foodservice channel, and competition in the retail space remains fierce with Australian product, particularly sheepmeat, keeping pressure on prices.

UK retailers have continued to work with us on locking in volumes for the first half of 2024 for lamb, which has been generally positive in terms of volume and pricing. The general market trends however do not bode well. A recent report out of the UK has highlighted the impact of poor consumer confidence and economic conditions on the protein category. Not surprisingly, for beef, demand for high-end steak cuts during 2023 have suffered while consumption of mince has increased. Lower cost proteins such as pork have prospered and sales of sausages have boomed, while the lamb category has been the worst performer across all protein sources with consumption well down on past years, aside from the main holiday periods when discounting is prevalent. It will take some time for the UK to figure things out I suspect. When you add in the headwinds that Brexit has created, this market is potentially the one that will take the longest to work its way out of its current state of depression.

Europe is entering the traditional season for game, which generally means a slowdown in sales of chilled lamb and beef, and that is certainly what we are currently seeing. The impact is more on the foodservice side, but with retailers struggling as consumers pull back on spending, we are also seeing slower sales into that channel, which does not bode well in the short-term. Frozen sales are also becoming difficult to lock in, with European importers happy to sit back and wait to see how supply from New Zealand exporters develops as new seasons production kicks in to gear.

The beef market in Japan is being hampered by cheap Australian grain-fed product and we are also seeing lower prices for domestic beef as consumer confidence continues to suffer, which is seeing demand from our retail partners slow down. Conversely, lamb demand is currently pretty solid, with tourism continuing to hold up the foodservice sector, particularly in the important Hokkaido market, and frenched racks remain in good demand from high-end foodservice operations in Tokyo and the rest of the mainland as we head towards the winter season.

In summary, market conditions are tough and the short-term outlook is unchanged, with more pessimism than optimism across key markets and customers when it comes to demand. With Australian beef and sheepmeat increasing in availability the supply side of the equation is also in a precarious position, and this is expected to be the case well into 2024 unless weather conditions change drastically across the ditch.

Rick Walker

General Manager Sales and Marketing