Promising outlook for New Zealand beef and sheep

Promising outlook for New Zealand beef and sheepmeat farmers

While demand from traditional markets may still be sluggish, New Zealand beef and sheepmeat farmers are now benefiting from a reduced global meat supply as well as new export opportunities to developing countries whose economies have better weathered the global financial crisis.

Wendy Voss, a senior analyst with leading food and agribusiness bank Rabobank, says the global economy may be well on the road to recovery, but at two speeds. While key developed markets like the United States, Europe and Japan are slowly improving, the recovery looks well entrenched in Asia, where demand for meat is strong.

“Europe, Japan and the US are still experiencing high levels of unemployment and underemployment, so meat demand from these traditional markets is still relatively soft, though slowly improving,” says Ms Voss. “While unemployment in the US now appears to be falling, European countries will take longer to recover because of their very rigid labour markets.

“In spite of the current pressures on demand we are seeing in markets such as the EU and US, they will remain key markets for New Zealand in the foreseeable future and even offer opportunities for modest export growth, mainly through reduced local supply. “However, the strongest growth in demand for meat, including offal, will be in developing countries, such as Indonesia, Russia, China and the Middle East, which have better weathered the global financial crisis and whose populations are rapidly urbanising and becoming more affluent.

“New Zealand, which already has a Free Trade Agreement with China and is currently in negotiations with India, is laying a good groundwork to take advantage of these growing markets over the next decade.

“The challenge the industry now faces is where to focus its attention given limited product supply and promotional funds. How do you maintain awareness in traditional markets and develop new markets? And how do you maintain a consistent supply of product to end users, to ensure that it remains on restaurant menus and retail shelves?” Ms Voss, who delivered a keynote address at the Federated Farmers High Country Field Day in the Nevis Valley on her recent speaking tour of New Zealand, says the challenge with exporting to developing countries is the potential for volatility.

Likewise, the strong New Zealand dollar, which put pressure on margins in late 2009 and early 2010 but has come back a little since last year’s highs, continues to be a concern for farmers.

“After a tough five years, producers whom I met with during my recent visit were cautiously optimistic about what lies in store for them in 2010 and beyond,” says Ms Voss. “The good news is that prices have picked up in recent months and should continue to rise over the next three years as demand increases and supply tightens. The outlook for global meat prices is very positive overall, albeit more complex and potentially more volatile.”

Ms Voss presented to farmers and agricultural companies in the Nevis Valley, Pio Pio, Otorohanga and Wanaka during her week-long visit from 9 to 13 March.

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