A change to the trimmings labeling regime is potentially a big threat for New Zealand beef exports to the United States.
In the past, sellers of manufactured beef in the US (where 42% of beef exports go) had to be labelled separately: lean fine textured beef (pink slime). In December the US Department of Agriculture reclassified pink slime in line with the definition of ground beef. It means pink slime can be included in lean beef without separately disclosing it.
Rabobank recently released its first Beef Quarterly for 2019 in which, overall, the outlook for NZ beef exports continues to look good.
Beef markets continue to look strong and a recent fall in prices is due to domestic pressures.
The bank’s sustainable farming system manager Blake Holgate said two issues might affect the change. How successful the change would be for NZ depended on how much capacity increase there would be in the US production.
“And how would consumers react?”
Good weather and shortage of supply, improving US prices and strong Asian demand gave a modest improvement in NZ farmgate returns. They were expected to soften as domestic kill rates increased.
If there is a backlash, consumers won’t use it.
“Will they react, demanding stores can’t use it .”
Holgate says since 2014 beef prices have been strong.
Most NZ beef is exported frozen and ideally it would be better to get more high-valued chilled away.
Beef markets look good with China reeling from African swine fever, creating a supply gap of 10 million tonnes.
China’s lax border controls have allowed a flourishing illegal or unofficial grey meat market. African swine fever border controls have been tightened and the grey meat reduced.
Rabobank believed enforcement had led to a sharp decline in grey market meat. Despite a 50% increase in imports of all meat, beef prices have risen,
China overtook the US as NZ’s largest export market for beef with receipts up to 54% in the last quarter of 2018 compared with 2017. The US takes 45% of exports for manufacturing. China’s official imports increased by 50% in 2018 to just over 1 million tonnes for the first time. Good weather and shortage of supply, improving US prices and strong Asian demand gave a modest improvement in NZ farmgate returns. They were expected to soften as domestic kill rates increased.
How long will the Chinese beef market prices last is the big question?
Holgate said the Chinese authorities were initially hoping to get the disease under control and the pressure of meat prices would put pressure on border control to be lax again.
However, it looked like the spread of the disease had become endemic and beef prices would be strong in the short and medium term.
African swine fever has also spread to Vietnam and will disrupt South-east Asian markets.
If border controls did become lax again, more Carabeef or young buffalo from India would flow in from Vietnam. Holgate said Australia has been trying to build its beef herd for a number of seasons, but pockets are killing capital stock.
Vietnam puts a lot of Carabeef through the grey market into China. Carabeef is exported from India to Vietnam and then re-exported to China.
Even though border controls were strengthened, beef imports also enter via Hong Kong.
Also helping NZ beef exports is problems with the competition.
In northern Australia up to one million cattle may have been lost in flooding earlier this year. That was an area with 26 million cattle, many breeding, so there will be longer-term impacts.
Drought in eastern Australia has ravaged farms with slaughter and export numbers up but prices have held up.
Rabobank says female cattle slaughter was up 23%.
Usually in dry years Australian exports to the US increase, especially lean trimmings, but in 2018 more went into Asia.
Holgate said South American exporters would want to get into the more lucrative markets NZ is in, like Europe, Japan and the US, but it would take time to become accredited. NZ is accredited and seen as a reliable source.
Holgate said longer term it was important to differentiate NZ beef from competitors like South America and Australia.