Tim Fulton

A New Zealand meat exporter to Asia has cast doubt on how long China will continue to chase imported beef as a substitute for diseased pork.

China’s demand for imported beef has rocketed since African Swine Fever forced widespread culling of Chinese breeding pigs. Beef exporters worldwide have rushed to fill the country’s protein gap.

“The disease is far from under control and has a high mortality rate. It is likely to hamper China’s pork industry for years to come,” an ANZ Research Agri Focus report for August says.

ANZCO Foods sales and manager Rick Walker said ASF was undoubtedly having a big impact on beef but it was only part of the story.

There was a question mark as to whether ASF was the real driver for Chinese beef consumption. Chicken would be a more natural substitute for pork and it was “more in line cost-wise and cuisine-wise”.

“The bigger driver is just that continued increase in affluence and demand for western-style cuisine.”

Walker agreed with ANZ’s report that beef was gaining space on restaurant menus and specific beef restaurants were popping up throughout major cities.

However, he was also concerned at signs importers were speculating on the trade. There had been anecdotal reports of increasing in-market inventory with cold stores filling up faster than warranted by actual consumer demand.

“This may lead to a correction in the coming months, although the underlying market strength suggests that any such correction would be managed as opposed to a crash.”

ANZ Agri Focus says generally NZ export prices have held up well this season to date due to strong competition between the United States and China for our beef.

Prices in the US market for imported bull and cow meat are the strongest they have been for at least four years.

However, there are signs that prices were now plateauing as Chinese demand may have reached its maximum price point, the bank says.

Walker said he didn’t entirely agree with that assessment. US prices had started to soften “but you would generally expect that to occur based on seasonality of demand and supply”.

US prices remain firm and ANZCO would expect them to stay ahead of five-year averages for the rest of this year and into 2020 because of the pressure China would continue to put on demand for manufacturing beef.

“I would suggest that the grinding category in China is actually more resilient than other beef cuts, given the growth of major burger chains such as McDonalds.”

Walker agreed with ANZ’s assessment that NZ was supplying only a small proportion of China’s total demand for imported beef, and that with our beef supply falling seasonally there was not a lot of pressure on processors to move product right now.

Alliance Group general manager of sales, Shane Kingston, said China’s emergence as a major beef market has helped NZ to wean itself off reliance on the US manufacturing market.

Kingston said apart from the impact of ASF, there had been a strong clampdown on grey channel imports of protein by Chinese customs authorities, converging with rising personal income and western influence.

China’s presence in the global beef market had changed NZ’s dynamic with the US and provided another major market opportunity for this country’s manufacturing beef, he said.

“Historically, the US has been the largest customer for New Zealand beef, which at times of high production has on occasions limited manufacturing beef prices from New Zealand, which has not always supported best returns for our NZ value chain members, processors or producers.”

NZ, with its mature Free Trade Agreement and most export beef plants approved to supply to China, has been a major beneficiary of these market conditions.

China was the emerging market for NZ beef exports and this looked likely to continue for the remainder of the year. As a result, imported beef prices in the US were tracking a lot closer to domestic lean beef prices than they have in other years. Many forecast this situation would continue, Kingston said.

Silver Fern Farms group sales and marketing manager for beef, Murray Jones, said prices in the US market for imported bull and cow meat had come off their recent four-year highs due to on-going large US domestic production.

Jones said Chinese demand may have peaked in the short term but demand was likely to remain stable between the arrival of Northern Hemisphere winter shipments in October and November and Chinese New Year on January 25, 2020.