Promising signs from 'mixed bag'
Mixed signals for beef and sheepmeat demand came through loud and clear during a whistle-stop tour of major markets by senior managers of the Alliance Group.
The 12-day trip to the United States, Germany, Britain, China and Hong Kong revealed strong demand for lower-value cuts in China, with the possibility of upgrades to pricier cuts and promising signs in the US.
However, retail demand in Europe, including Germany, one of its most prosperous nations, remains weak.
The markets were showing contrasting demand, said Alliance Group marketing manager Murray Brown.
"It was quite a mixed bag and, if we go to the United States, which has probably struggled for us in the food-service sector, high-value lamb has been removed from menu placements because of the economy, but there are more house sales and the jobless rates have been the lowest in 25 years at 7.9 per cent, so these things are encouraging."
Another promising sign is that the price gap between Australian and New Zealand lamb has closed, because the Australian meat schedule has risen.
At the start of last year, New Zealand lamb was 20 to 25 per cent more expensive. This has narrowed to less than 5 per cent.
Brown said some buyers had converted to New Zealand lamb in retail, with a some movement of products, but conditions were still tough in the food-service area. Europe, however, was a different proposition, he said.
"There is no question that Europe is very flat. High-value protein segments are struggling to sell and Europe will be a difficult market for at least three years."
Even high-income Germans have moved from high-value protein, including lamb and venison, and conservatively traded down in their meat eating.
In Britain, lamb prices have continued to be low in line with the past five years, but consumption is increasing, because supermarkets are keeping prices low to attract lamb consumers, who are good shoppers.
Lambs sales to the United Kingdom were positive at Easter, which is encouraging for sales to the end of the year, particularly since so much stock has passed through North Island meatworks during the drought.
China's appetite for lower-value meat continues. In the past six months, it has imported 70,000 tonnes of lamb, mutton and sheep offal, whereas a year ago it took only 63,000 tonnes for the year.
Brown said China looked to have maximised all the low-value meat from New Zealand and would be wondering where it could source more to match growth.
"The only way they can go forward is to progress to middle or higher-value cuts over the next three to five years."
China entered the low-value sheepmeat trade when prices were down and the question was whether it could continue to compete in the future with alternative markets, he said.
North Island lamb numbers have dropped and, in the past six weeks, lamb prices have improved by 5 to 10 per cent for selected low- value products, mainly lamb flaps and lamb shoulders.
Meat companies are waiting to see whether breeding ewes killed during the drought will affect lamb supplies and prices.
- The Press
Do you agree with claims that Fonterra is transferring wealth from farmers to unit holders and to the dividend in contradiction of its milk price manual?Related story: Lower milk price 'to boost dividend'