ANZCO Foods Market Update - February 2025

The first few weeks of 2025 have generally been positive for beef and lamb demand, albeit with ups and downs across specific markets.

China has just returned to work after its New Year holiday. This is always an important window for beef and lamb consumption and is a valuable barometer for the state of the wider Chinese market as we look ahead to another year. Initial feedback from our customers and contacts is that sales in the retail and foodservice channels during the holiday were disappointing. One of our customers, that supplies further-processed lamb products into one of the largest restaurant chains in China, noted that sales were at 70% of the volume originally forecast for the holiday period, and this theme seems to be generally consistent across many of our customers. As a result, the initial round of post-Chinese New Year ordering to restock freezers has been tepid at best, which only confirms the theory that many players in the market are sitting on higher-than-expected inventory levels. February and March tend to be a tough few weeks in the Chinese market as consumers try to rebuild their bank accounts after a busy and expensive festive season, and it would seem that this traditional holiday hangover will definitely be a factor in 2025.

Japan also continues to struggle due to the economy’s ongoing challenges. We are seeing many of our retail partners focusing on promoting domestic beef, which is in plentiful supply and relatively low cost. This is impacting demand for our product and imported beef generally. The foodservice sector is also relatively flat and this continues to limit sales for lamb, as consumers avoid eating out because of their lack of overall confidence. Retail sales however have had a relatively solid start to the year, again a sign that consumers are preferring to eat in rather than spend money in restaurants, and a number of our retail partners are looking to focus on lamb promotions this Spring, which will hopefully provide another boost to consumption.

We are generally seeing good prices and demand for our lamb in the UK and Europe. This is largely supply driven as opposed to any sudden surge in consumption, with domestic supply of lamb very tight and expensive, adding to the challenges that we have been facing back here on the livestock front; meaning that New Zealand supply has been tighter than many would have expected at this time of the season. Likewise, domestic beef supply also appears to be in trouble, and this is driving more interest, particularly in the UK under the FTA, for supply of our New Zealand premium brands and also for more commodity style manufacturing beef. Price indications suggest that food manufacturers in the UK are willing to consider the sort of numbers that we are seeing in a very buoyant US market, so this could add a useful string to our bow as 2025 unfolds, providing a small but useful diversification of markets, on the assumption that China will continue to be off the money for the foreseeable future.

All eyes remain on the US, in terms of the state of the market as well as politically, given the aggressive agenda that President Trump is pushing. On the politics, we can't discount the possibility that New Zealand agriculture will be part of his tariff plans. At the same time, I think it’s important not to become preoccupied with that threat and that we continue to focus on what we do well, which is supplying high quality beef to our customers as efficiently as possible. I like a phrase that I heard on a podcast related to this topic just last week which was ‘panic slowly’. I think that sums up the situation well, in that we need to be aware of the threat and consider the implications, but don't make knee-jerk decisions based on situations that may not eventuate and which we will have very little control over even if they do.

In terms of the market, the US industry continues to see record high prices for domestic lean beef, and the spread with imported product remains relatively wide on a historical basis, suggesting there is more room to continue to push value in the weeks and months ahead. The livestock situation in New Zealand means we have less product to offer to our US customers than we may normally have planned for this time of the season, and while that is far from ideal, it helps keep the pressure on our customers as we push for maximum value on the product that we do have available to sell.

While supply out of New Zealand is unusually tight on lamb and beef, supply dynamics globally point towards a much tighter market in 2025. Australian beef and lamb supply appears to be slowing up, with good summer rains supporting that trend. It's been well documented how tight the US beef industry is, and latest reporting from Brazil suggests its beef production is forecast to be down 5% in 2025, confirming what we had started to see signs of in late 2024. All positive stuff in a global market which is showing signs of a potential recovery in consumption but with underlying nervousness remaining around inflation and geopolitics. Hence it promises to be an interesting few months ahead as the various issues play themselves out.

Finally, just a reminder that ANZCO Foods IRONMAN New Zealand is being held in Taupō on Saturday 1 March. It promises to be another epic weekend of racing. We have 18 ANZCO Foods staff members taking part this year, as well as four of our loyal ANZCO farmers; Wade McRae from Southland, Campbell Peters from Golden Bay, Chris Thwaites from Canterbury, and Kieran Hickman from Marlborough. If you know any of these gentlemen, make sure you reach out to them and wish them all the best. Taking on the IRONMAN challenge is a huge commitment, and we are absolutely stoked to have them as part of the ANZCO Foods race team.