Market Update - April 2022

At a high level, global market conditions remain unchanged, with a good level of inquiries and solid pricing across our customer network and for all categories of beef and sheepmeat.

With every week that passes, however, the wider operating environment in which New Zealand exporters are working within becomes more volatile and uncertain, thus the veneer of buoyant global market conditions is arguably thinner than it has been for quite some time.

Beyond our own issues managing our way through the current Omicron outbreak, in the wider world the focus today is on China. While it is hoped that in the coming days we will see Shanghai return to relative normality, the implications of the lockdown there on supply chains will undoubtedly linger, with vessels having been unable to unload consignments at Shanghai port and containers stacking up in alternative destinations, which then has a spillover impact on other trade routes and markets. The past week has felt very much like March 2020 when Covid-19 was in its infancy and China was at its epicentre. A repeat of that scenario will do no favours for farmers or meat processors given the already challenging situation we face with a kill well behind past seasons due to the lack of labour and virus spread across processing sites, and the pressure that this will create if inventory is unable to freely flow to our most important market in the weeks ahead as production starts to ramp up. As a reminder, 52% of New Zealand’s total sheepmeat exports were shipped to China in February as well as 40% of our beef trade.

In the US, a recent survey showed that over 70% of respondents believe the pandemic is ‘over’ – a positive sign of growing consumer confidence in this important meat-eating market. Despite that result, only 45% of respondents feel comfortable eating out and more than 65% remained working at home or in a hybrid working model, highlighting the ongoing challenges the foodservice sector will face as it comes to grips with moving forward into a post-Covid world. No doubt these American trends will be relevant across a wide range of markets, including our own foodservice channel here in New Zealand, in the months ahead.

Inflation around the world is increasingly a concern. While its immediate impact on exporters such as ANZCO Foods has been higher prices for our export shipments, the longer-term impact is one of increased risk for all parties in the value chain. We are already seeing consumers in many of our established markets trading down and/or minimising their purchases because of the impact of inflation on disposable incomes. Conversely, because food inflation is hitting all categories, the actual impact may be different than in past cycles where beef and lamb suffered more than other protein sources. Poultry and pork prices are rising even faster, which is linked to the other major factor impacting markets – the ongoing war in Ukraine – which is hitting the cost of grains used for feed in these two industries. The war is also having an impact on fruit and vegetable prices too, with the rising cost of gas required to keep glasshouse-based production models operating now at a breaking-point.

Perhaps of greater concern is the potential impact of rising food and fuel prices on the developing world and the political and social unrest history shows us this can lead to. The ongoing tensions in Sri Lanka as well as the recent toppling of the government in Pakistan are perhaps early signs of greater tensions to come as 2022 plays out and inflation continues to be a major factor in the day-to-day lives of global consumers.

Another interesting side-story to the current raft of challenges we are facing around the world is the plant-based protein market, which has attracted significant media attention and investment during the past two years. As is often the case, the US generally leads the way and is a good bellwether for how such products will fare in other parts of the globe. Another recent survey out of the US has provided some interesting insights, with consumers who classify themselves as flexitarians showing signs of having moved past its peak, growing from 12% in 2019 to 19% in 2021, to 16% in early 2022. Likewise, those who classified themselves as meat-eaters declined from 81% in 2019 to 71% in 2021, but has now showed the first signs of recovery, landing at 74% in early 2022. There’s no doubt plant-based products are here to stay and have a part to play in the wider global market for protein, however these numbers give us hope that the merits of our product are increasingly being recognised and, while we should never be complacent, that we should remain confident in our long-term future.

Stepping back from these wider market dynamics, April is an important month for sheepmeat demand around the world as the religious traditions associated with Easter and Ramadan collide. Demand in Europe, in particular, has been extremely solid and in many instances has outstripped our ability to supply due to our recent plant limitations and supply chain challenges, but bodes well as we look ahead to the coming weeks.

It will be a particularly interesting Easter for UK retailers as the impact of high lamb prices and general inflationary pressures drive consumers away from the mainstream chains to the discounters and away from the increasingly expensive leg of lamb to smaller and cheaper cuts.

Demand for lamb in Japan is returning strongly, as Covid-19 restrictions are finally removed, however once again the inherent challenges associated with inflation and shipping reliability are impacting trade and consumer choices.

The US market for manufacturing beef has been side-tracked of late by the flow of cheaper material coming in from Brazil. They have now filled their annual quota after just three months of the year. This volume will take some time to work through customer supply chains, but the outlook remains generally positive despite the inflationary headwinds, with ground beef and burgers always on the menu in such times, and the record prices being seen for chicken working in our favour.

Finally, a big thank you if you have tried our limited-time Jamaican Jerk BBQ Brisket Angel Bay patty this past month. We have seen record sales across our Angel Bay range during the past couple of weeks and we look forward to bringing other new ideas and taste sensations to your local supermarket in the months ahead.   

Rick Walker
ANZCO Foods General Manager Sales and Marketing