Rabobank says lower global beef production over the medium term will play into Kiwi producers’ hands. Although Chinese consumers may be currently prioritising 'value', a the premiumisation shift will work in New Zealand's favour

Content supplied by Rabobank

Beef remains the major source of optimism for New Zealand red meat producers in 2024, and the outlook for 2025 is similarly positive, according to a new report by agribusiness banking specialist Rabobank.

In its recently-released Global Beef Quarterly Q3 2024, Rabobank says New Zealand farmgate pricing for bull beef, prime and cull cow was above five-year averages over quarter two and has continued climbing in quarter three.

“While North American beef prices continue at higher levels than those in the southern hemisphere, we did see further lifts in New Zealand cattle prices throughout July,” report co-author, Rabobank senior animal proteins analyst Jen Corkran said.

The report says strong US demand and export pricing is driving a lot of the farmgate return for New Zealand.

“The US has become New Zealand’s leading market for beef exports through 2024. Export values to the US surged over May and June and, for the first half of the year, volume to the US was up eight per cent year on year (YOY) to 109,000 tonnes and the value up 17 per cent,” Ms Corkran said.

“Over the same period, volumes to China were down 21 per cent YOY to 89,500 tonne, the equal lowest shipment volumes since 2020.”

Ms Corkran said procurement pressure from processors was also adding upside to prices. “Processors keen to get their hands on cattle have also been driving farmgate prices higher. This, along with the seasonal dip in cattle supplies, has added to the upward pressure on prices,” she said.

“Prime cattle prices neared NZc 700/kg cwt to start quarter three, well above the five-year average range. In saleyards, demand is high for R1 and R2 unfinished bull beef and prime beef animals, reflecting producers’ expectation of strong returns.

New Zealand producers see beef as the shining light of 2024. Good conditions on farm, with a largely kind winter when it comes to rainfall, has meant good feed utilisation as well as a general feeling of wellbeing around the beef industry.”

Future looks positive

With local production volumes forecast to be steady to slightly down over the next 12 months, the report says, New Zealand is well positioned to enjoy above-average returns, positive for both exporters and producers.

“Bull beef numbers on farm look to be below longer-term averages, with fewer animals reared in recent years,” Ms Corkran said.

“Given the strong outlook, more dairy-beef calves may be reared over spring 2024 and, if it eventuates, this will add to beef production in New Zealand over 2026-27.”

Ms Corkran said lower global production over the medium term would also play into Kiwi producers’ hands. “The aggregated production of major beef-producing countries is expected to fall slightly (down three per cent) in quarter four 2024 compared to the same period in 2023 before declining further into 2025,” she said.

“Higher production volumes in Australia in quarter four 2024 compared to the same period in 2023 do not offset declines in Europe (down one per cent), New Zealand (down seven per cent), Brazil (down three per cent), the US (down five per cent) and China (down two per cent).

“Notwithstanding, quarter four production is expected to be 3.8 per cent higher than the 10- year average for quarter four, we then expect it will contract, dropping below the 10-year average in quarter three 2025.”

Spotlight on China

The report’s feature article focuses on the China – New Zealand’s major market for beef exports over the last decade – and says new consumer trends are shaping the country’s beef market.

“China has dominated global beef markets for the last five years, taking more than a third of total global beef trade in 2023, but slower economic growth and a declining population are having an impact,” Ms Corkran said.

“The Chinese beef market still has ample growth potential, given per capita consumption is lower than other developed Asian countries. However new consumer trends are emerging, which will change consumption.

Overall, the premiumisation trend is slowing, while consumers are pursuing quality and value.”

Ms Corkran said Chinese consumer markets show a clear trend of pursuing value for money, but with a complex pattern.

“Although soft prices suggest more sensitivity to expensive beef cuts, beef consumption volumes increased faster than any other terrestrial species, with a compound annual growth rate (CAGR) of 3.2 per cent from 2013 to 2023,” she said.

“Rising beef consumption volumes, despite slower income growth, show consumers continue to seek higher-quality protein but at reasonable prices. Currently, retailers and food service operators are under pressure to deliver cheap and basic cuts, such as shin, shank and belly, and good value cuts at discounted prices.”

Ms Corkran said the Chinese market remains an incredibly important one for New Zealand beef producers – having been the dominant market for beef exports in recent years.

“And accordingly, developments in China have a big impact for local producers here in NZ,” she said.

“The good news is that Chinese consumers have a rising awareness of health and nutrition post pandemic which offers a good longer-term outlook for beef consumption in China, as it is widely perceived as a nutritious protein in China.

“The current trend of ‘value for money’ gives South American suppliers a clear competitive advantage in low to medium-end markets, while products from New Zealand hold a position in medium to high-end markets, but all products are currently seeing lower prices than a year ago.”