Market Update - March 2022

The general outlook for global markets remains strong despite the ongoing uncertainties and volatility we are facing around the world and closer to home.

The ongoing conflict in the Ukraine is the major variable facing global markets today. In reality, the direct impact on our business should be manageable given that we do not trade into the Russian or Ukrainian markets. However, there will undoubtedly be some indirect impacts that can only add another variable to general market sentiment in the months ahead. Global supply chains remain extremely congested, so having a major conflict such as this play out will inevitably increase pressure on shipping and general logistics. Ukraine and Russia are major suppliers of grain that is widely used as feed in protein industries around the world. We have already seen spikes in pricing many soft commodities. While the impact of those cost increases is largely irrelevant to New Zealand farmers thanks to our reliance on pasture-based farming systems, the impact on farmers in the likes of North America could be significant given their reliance on grain as the primary source of animal feed, not just for beef but also for other proteins such as pork and chicken. This may prove to be an unexpected benefit for New Zealand exporters if it serves to curtail supply elsewhere. Our sales team in Europe is already reporting a spike in the retail price for poultry across the continent, with a material percentage of chicken originating from the Ukraine. Regardless of the possible implications and scenarios, we will be watching how the Ukrainian situation unfolds in the weeks ahead and ensuring that we do what is necessary to manage any risks to our sales portfolio.

Putting that geopolitical issue to one side, demand for beef and sheepmeat across all our major markets looks set to stay strong in the coming weeks.

This demand picture continues to be supported by tight global supply. Statistics out of Australia highlight that in the last quarter of 2021, the number of cattle processed was at its lowest level since 1971. As has already been reported, January production in Australia was also severely impacted by Omicron. Processing numbers have bounced back strongly in February but this is simply playing catch-up and there is no sign that the Australian situation will improve anytime soon. As a result, their ability to increase supply to global markets is going to be limited. South American supply appears to remain relatively tight as well.

In Europe, demand for chilled and frozen beef is tipped to remain strong in the short term, driven by the tight supply conditions noted above, particularly out of South America, and the lack of inventory in-market as the continent slowly comes out of a long Omicron affected winter. Lamb is no different, with our European customers keen to secure both chilled and frozen product to meet the expected increase in foodservice demand for lamb as spring weather arrives and restrictions ease. Of course, it is Europe that is also most likely to be impacted by the Ukrainian situation. At this stage it is too early to know what that potential impact may look like on our European markets, but it is unlikely to be positive and may put a dampener on demand just when sectors such as tourism were looking for an extended period of normality following two years of Covid-19 challenges.

Likewise, the UK market remains tight. Consumer sentiment is being negatively impacted by the increasing cost of living, whether it be for food, heating homes or filling up the car at the gas station. While this is resulting in a softening in demand for highly priced lamb, the relatively tight supply position here in New Zealand means that we are still struggling to meet the opportunities that are being presented.

Japan has had a tough February as the country has continued to struggle to overcome its Omicron outbreak. Demand, whether it be in retail or food service, has been below expectations. Current restrictions are expected to continue through much of March, but with case numbers easing there is an expectation that we will see a return to normal trading conditions heading into April. Limited supply from our competitors in Australia and North America mean that our customers are tight with regards to their in-market inventories. This should help the recovery in demand when it finally arrives.

The North American frozen beef market continues to perform very strongly and we expect this to continue throughout March and as we hit the traditional higher demand period with warmer weather arriving and the grilling season firing up. On lamb, US retailers and foodservice operators are struggling with the very high prices expected for products such as frenched racks but, as per the UK, while that position may be a concern for future sales, realistically we are constrained in terms of our ability to supply and so the market remains in balance.

Post Chinese New Year demand across our major Chinese buyers has been very good. Beef demand has certainly been the star while lamb and mutton enquiries have been less forthcoming in recent weeks. China is dealing with its own issues with Omicron and the expectation is this will remain a handbrake on overall economic activity and general demand for protein in the weeks ahead. Regardless, China continues to lead the charge regarding overall global market sentiment and we remain confident that despite their internal challenges their demand for New Zealand beef and sheepmeat will be very good over the course of the next month and beyond.

Sales in New Zealand during February were very strong as retailers prepared for our current Omicron challenges and the potential for supply chain and production disruptions. We expect to see good demand for beef and lamb in the domestic market in the lead up to Easter, with retail demand taking up any slack from the fallout of Omicron on the foodservice sector.

Lastly, a shout out to our successful Greenstone Creek beef chefs across New Zealand who received recognition in last month’s Cuisine’s Top 100 Restaurant awards. We only work with around 20 restaurants due to the very tough guidelines we place on our graders at our plant in Eltham when it comes to hand-selecting Greenstone Creek beef, so to have 11 of our Chefs on the Top 100 list was recognition of the high-quality food and service they deliver, and why we choose to work with them. You can find details of all of our restaurants at our website: www.greenstonecreek.co.nz

Also, this month sees the launch of our latest addition to the Angel Bay range – a limited time only Jamaican Jerk Brisket Burger! Keep an eye out for it in your local supermarket, and I invite you to try it when you next fire up the barbecue as the end of the golden weather approaches.

Rick Walker
General Manager Sales & Marketing