Market Update - October 2021

The past month has been another positive one regarding global demand for ANZCO Foods’ beef and lamb, and the outlook for the last two months of the year remains upbeat.

Having reached mid-October, we are now officially in a key period for two important markets – China, as they formally start to build inventory of both beef and sheepmeat leading into Chinese New Year, and the UK, as shipments of chilled lamb make their way across the seas to fill retail shelves in time for Christmas.

In both instances, supply chain issues will be front and centre in our minds, but we remain focused on the task at hand and we are hopeful that the variables beyond our control can be minimised. Certainly, the demand in both markets has been very good and our customers are keen to work with us to make sure that the risks are managed at both ends of the supply chain. This bodes well as we work our way through this important period.

China’s appetite for beef shows no sign of abating and it has been interesting to see how trade flows have changed during the course of 2021. The big winner has been the US, with exports to China topping 80,000mt for the year through to the end of August, compared with less than 10,000mt for the same period in 2020. The US industry has been the major beneficiary of Australia’s woes related to their domestic cattle supply and pricing, as well as their ongoing political challenges with China. Australian beef exports to China year to date are at under 100,000mt, or just on half of what they shipped in the same period of 2020.

An interesting and connected outcome is that China’s gain has been Japan’s loss when it comes to access to US grain-fed premium beef. Australian beef exports to Japan have actually increased to fill that void left by the US, which again is a consequence of the political complications that Australian beef exporters are facing today in China. The most apparent sign of those complications has been in the clearance times for Australian product by Chinese port authorities, which are exponentially higher than what we and other exporters encounter.

The Japanese market in general has hopefully turned the corner, with COVID-19 cases seemingly in decline as vaccination rates increase. As a result, state of emergency restrictions on restaurants and general hospitality have been removed or relaxed across the nation. This is seeing a return to normal buying patterns as importers and distributors look to rebuild inventory and as consumers look to cautiously return to eating out. This is very positive for ANZCO Foods as we look ahead to the end of 2021 and into the first quarter of 2022, given the importance we place on this market and our investment in our brands and people there.

The North American market for beef has remained extremely steady over the past month, which historically is a period where one might have expected a softening in both demand and pricing. This bodes well for the last few weeks of 2021. General supply remains tight for manufacturing beef, with China keeping the pressure on US buyers and our competitors in Australia and South America struggling to keep up with the pace. With this scenario not likely the change in the short term, ANZCO Foods should be in a good position to keep prices firm as new season livestock becomes available and our sales volumes increase. Lamb demand in the US has also continued to exceed expectations. The outlook for the next two months is positive. US consumers are ready to have a ‘proper’ Thanksgiving and Christmas in 2021 with extended family and friends, after managing lockdowns during the same holiday season in 2020. Supply chain issues will remain our largest headwind in this region too as we look to meet this demand. Ports across the US are getting more and more congested, and the associated costs for ANZCO Foods and our customers are significant. Airfreight is fast becoming the only option to keep the chilled business alive, which is never a cheap way of doing business.

You may well have seen the report issued by Beef + Lamb NZ recently, focused on the opportunity for the New Zealand industry related to regenerative agriculture. North America is certainly leading the charge when it comes to this topic and the wider trend around climate change is underpinning consumers' interest in it. This past month, McDonald’s publicly reconfirmed their global commitment to reducing its environmental footprint within its restaurants and across its wider supply chain. This will inevitably mean greater expectations on strategic suppliers such as ANZCO Foods given our partnership with McDonald’s via our beef patty manufacturing site in Waitara as well as our long-standing commercial relationship selling beef into their North American business. While this announcement by McDonald’s is not going to materially change the way we do business with them or you in the short term, it is another useful reminder that our global customers are actively listening to their consumers and will react accordingly to meet their changing needs. Hence why it is so important that as an industry we do make an effort to look proactively at topics like regenerative agriculture to make sure we stay ahead of the curve. It will be interesting to see how Beef + Lamb NZ looks to engage with farmers and processors to map out how we might move this opportunity forward in 2022.

Regards,

Rick Walker
General Manager Sales & Marketing