Market Update - June 2023

Global markets for beef and lamb continue to underwhelm.

The general sentiment in China feels like it has gotten worse rather than better over the past month. Inventory levels of both frozen beef and sheepmeat remain high. Consumer confidence continues to be of concern, which is flowing through into purchasing decisions in the retail space and the frequency and value of people eating out and supporting the many thousands of foodservice operators that provide such an important channel for our products.

The US market for both beef and lamb is in a similar predicament. While the talk of recession seems to have eased, and share markets are rebounding on renewed confidence that the Federal Bank will not continue to increase interest rates as year-on-year inflation starts to trend lower, none of this seems to have had any real impact on middle-class families across America, who are keeping a tight hold on the purse strings. It has been interesting to see results and commentary from some of the major US retailers over the past couple of weeks. Financial results have generally been behind expectations, with the lack of consumer confidence to go out and buy big ticket items and higher priced foods and beverages being blamed.

In the case of both China and the US our view is that the longer-term outlook remains positive, but it is going to take longer than hoped to see those green shots really take hold and flourish.

I have just returned from a week in the UK meeting with some of our major retail partners. The general feeling was quietly positive, albeit coming from a very low base of the past 12 months thus this is not necessarily a meaningful sign of recovery. Data released this past week shows how the impact of higher food prices is driving UK consumers towards the two major discount chains, Aldi and Lidl, with the value of their in-store sales up a whopping 23% for the past three months versus the same period in 2022, which is over twice as high as the rates seen in the traditional mainstream retailers such as Tesco and Asda. It was exciting to see our ANZCO lamb in Aldi supermarkets following their recent decision to split supply between British and New Zealand versus their previous commitment to only stock domestic lamb, and these growth rates suggest that we have found a great partner for the future. There were also some interesting conversations around the issue of sustainability and the growing expectations from UK retailers on New Zealand suppliers to help them meet commitments to reduce their carbon footprint. The overall theme was that this issue continues to attract much attention and general naval gazing, with different retailers trying to find a solution to their specific problems in different ways. Some are clearly more advanced and coherent than others in this regard, but overall there appears to be a lot of talk and not much concrete action. The situation is not being helped by the devolved nature of government across Wales, England and Scotland, with each set of politicians dealing with the issue in their own way. This only serves to add another layer of confusion and complexity. It will be important that we continue to engage with UK retailers to make sure New Zealand drives its own destiny around sustainability and the environment through our proactivity as opposed to having a ‘fait accompli’ forced upon us as an industry. Beyond the retail space, the UK foodservice channel is still struggling, driven by the same dynamics that we are seeing in the US, China and in most of our markets. It will be interesting to see how this sector goes over the important summer season.

Demand for chilled beef and lamb across the English Channel in Europe has been solid over the past month and with weather now on the improve the BBQ season should see a continued uptick in consumption. Frozen sales have been far less upbeat, with importers and distributors keen to stay short and minimise any risk around their inventory levels.

Japan also is struggling to get out of first gear when it comes to consumption of lamb and beef, affecting both retail and foodservice channels.

In summary, it certainly feels like there are greater forces at play when it comes to the short-term outlook for June and July across all of our major markets. These are forces that are largely out of our hands as a sales team. We remain hopeful that the US will be the starting point for a recovery in beef prices and volumes as their domestic supply position continues to tighten, but no doubt even if this is to occur sooner rather than later there will be plenty of competition from the likes of Australia and Brazil given the state of other major beef importing nations – notably China.

Finally, just a reminder that ANZCO Foods will have a presence at Fieldays in Mystery Creek this week. It would be great to see you there if you are planning on attending. We will have representatives from sales and marketing as well as our livestock team, and plenty of samples of New Zealand’s finest beef and lamb to taste, so I hope to see you there.

Rick Walker
ANZCO Foods General Manager Sales and Marketing