Buffering China’s downturn

I acknowledge it’s tough for sheep farmers out there at present. Farmers are facing higher interest rates, other cost pressures and lower livestock returns.

However, our red meat exporters are doing everything they can to mitigate the impact of these Chinese headwinds.

While China remains the only viable option for some products, exporters have looked to pivot other products to alternative markets where demand and pricing have remained relatively stable.

We’re fortunate that the drop in exports to China has partly been offset by growth or recovery in other markets.This is the benefit of New Zealand’s diverse export market strategy.

Looking forward, if demand in other major markets remains steady or continues to recover, that will help maintain that stability for the rest of the year, even if the Chinese economy remains weak.

China, the United States, the United Kingdom and the European Union account for 80% of sheep meat exports by volume and value. However, we are seeing encouraging increases from other markets, particularly Canada, Saudi Arabia and Japan.

In the first six months of 2024, New Zealand exported 223,889 tonnes of sheep meat, 3% more than in the same period in 2023.

The value was $2.05 billion, 5% lower than in 2023. This was largely due to exports to China falling 22% by volume, to 98,222 tonnes, and 40% by value to $517 million.

Along with weak consumer confidence, a further factor has been an increase in China’s domestic sheep meat production due to higher levels of commercial investment following good prices in recent years.

Despite inflation and cost of living concerns, US consumers have continued to buy meat. Overall, our sheep meat exports to the US rose 49% by volume, to 20,012t, and 29% by value, to $354m, in the first six months of this year. So far this year, the US had the highest free on board (FOB) value for New Zealand sheep meat at $17.71/kg, followed by the European Union at $14.73/kg, the UK at $9.21/kg and China at $5.26/kg.

A significant reduction in UK food price inflation has seen some recovery from the very low levels of 2023. Sheep meat exports rose 53% by volume, to 25,509t, and 43% by value, to $235m, compared to January to June last year.

‘We’re fortunate that the drop in exports to China has partly been offset by growth or recovery in other markets.’ – Sirma Karapeeva, Chief Executive, Meat Industry Association

Exports to the EU remained mixed, increasing 10% by volume, to 36,270t but value fell slightly by 2% to $534m.

In terms of things to watch, China will continue to significantly influence exports but the Chinese economy is hard to predict.

Australian sheep meat exports have also increased substantially following a period of flock rebuilding. This impacted our exports to China last year, but that hasn’t been the case in 2024, with Australia also experiencing a 22% drop compared to the first half of 2023.

Overall, however, Australian sheep meat exports are 21% higher than the same period last year. The Australia-UK free trade agreement also came into force in June 2023 and while their exports to the UK remain well below those of New Zealand, they have increased by 71% this year.

Over the coming months, our exporters will be keeping a watchful eye on the Chinese market but also look to pull as many levers as they can in other markets so they can maximise returns.