A new report published by Beef + Lamb New Zealand does not anticipate any significant turnaround in Chinese demand for red meat in the short term.
The report, an analysis by BLNZ’s Insights team, examined when demand may improve.
Results reveal the NZ red meat industry will face continued challenges for some time yet as China’s economic weakness and competition from Australian supply impact red meat exports.
The report highlights several key factors influencing market conditions and when it can be expected to see conditions improve.
BLNZ does not anticipate any significant turnaround in Chinese demand for red meat in the short term.
Sheepmeat prices, in particular, are predicted to remain at multi-year lows, as NZ competes with strong Australian exports and abundant domestic pork supplies in China, and the Chinese economy remains weak.
Historically, NZ lamb commanded a premium over Australian lamb in the Chinese market, but the values converged in 2022, suggesting China now views NZ and Australian lamb as close substitutes.
Consequently, NZ exporters have had to align their prices with the lower rates offered by Australia in recent years.
As China is NZ’s largest market by far for sheepmeat, the domestic lamb and mutton farmgate prices are highly correlated with the value of sheepmeat exported to China.
Sheepmeat prices in China are now lower than during the 2016-2017 season when prices first began to accelerate.
At this stage, China’s economy is not expected to rebound for some time because of continuing problems in the property sector, and low consumer sentiment is likely to stifle domestic demand and activity.
However the report suggests the Chinese economy is “notoriously opaque and hard to predict”.
The number of official economic indicators has reduced significantly in the past year.
The Chinese economy therefore couldimprove more quickly than currently expected, but much will depend on growth in the rest of the world and whether that can help boost China’s manufacturing exports and economy.
Despite these short-term challenges, China’s economy is projected to recover in the medium term and as it rebounds so too will the disposable incomes of the largest middle class in the world.
“We know times are tough right now and farmers are looking for certainty coming off a tough financial year last year,” BLNZ chief executive Sam McIvor said.
“Unfortunately, it doesn’t look like there will be much relief this financial year, especially for sheepmeat farmers.
“We know the market will turn, though; it is not a question of if, but rather of when.”
The exact timing of market recovery remains uncertain with geopolitical factors, including trade tensions between China and the United States and European Union, adding further unpredictability to the outlook.
US President Biden recently imposed significant tariffs on imports from China, and the EU is considering its trading relationship with China.
Since NZ and China established a Free Trade Agreement, China has progressively developed into a vital market for NZ red meat.
In the 2022-2023 meat export season, almost half of NZ’s lamb exports were to China.
“Our report highlights the challenges and opportunities within the Chinese market.
“The fundamentals of our safe, nutritious product remain and our farmers will be looking forward to an improvement in the conditions and the resulting uptick in exports that will result,” McIvor said.
The purpose of the report was to discuss the current economic situation; what is driving consumption; recent foodservice performance and what is the average consumer most likely to eat; China’s sheepmeat production and how it competes with imports; competition from other countries that export sheepmeat to China, and prospects for China as a market for NZ meat exports in the short and medium term.
The report also examines the broader economic context, consumption drivers, foodservice performance, and the competitive landscape, offering an analysis of China’s red meat production and import dynamics.
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