Drop in Chinese demand puts New Zealand beef prices under pressure

Tuesday, 3 March 2020

By Felicity Rusk

Cattle prices in New Zealand have not had positive start to the year. Since mid-December, farmgate prices have been falling. Although it is typical for prices to fall at the start of the year, the decline is larger than normally expected.

This decline is likely a result of a number of factors. New Zealand has been able to capitalise on the protein deficit in China, a result of the outbreak of African Swine Fever among its domestic pig population. As such in 2019, exports of fresh and frozen beef to the nation reached a total of 220,000 tonnes, 90% more than in the previous year.

With such strong growth, New Zealand’s reliance on China as an export destination increased. In 2019, China accounted for almost half of beef exports, up from 27% in the previous year. As such, the outbreak of coronavirus has had a knock on impact on the New Zealand beef industry.

With a number of Chinese New Year celebrations cancelled, frozen food stocks were not depleted as normal. As such, import demand dropped off significantly. Additionally, with most restaurants closed for the time-being, out-of-home consumption of beef has dropped considerably.

Supply chain disruptions due to logistical challenges through restricted areas were reported in January, which only put further pressure on prices. This comes at a time when New Zealand producers are looking to liquidate herds, due to the ongoing pressures on the dry weather. Reports suggest that producers are having to wait up to a month for cattle to be processed.

Nevertheless, with China in a protein deficit, it is likely that once the supply chain issues are resolved, New Zealand exports of beef will resume as normal. However, with the situation still developing, it is difficult to anticipate when this will be.

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