July 4, 2007

 

New Zealand to eye new beef markets to ease competition with US

 

 

New Zealand beef exporters are on the run to look for other opportunities in alternative markets as the United States gradually makes its way in the lucrative markets of Japan and South Korea, according to a recently issued report.

 

The Rabobank Global Focus Report on beef said New Zealand's competition with the US to corner a sizeable market chunk in South Korea and Japan will increase after these countries have lifted the US ban on Bovine Spongiform Encephalopathy (BSE). 

 

At the same time, increased beef demand from other markets, including developing countries, will see New Zealand exporters seek new customers, the report said.

 

Report author, Rabobank senior Food and Agribusiness Research unit analyst, Hayley Moynihan said that an increase in carcass weights was more than offset by falling slaughter numbers in 2006, as production declined for the third consecutive year.

 

According to the Moynihan, the dairy industry has exerted the greatest influence on beef production levels, as dairy industry trends will continue to significantly influence beef supply in the coming years.

 

Moynihan said that while 2007 is expected to see an increase in production due to calves reared over the past two years and an increase in cull dairy cows, 2008 and beyond is likely to be negatively impacted by the current strong outlook for dairy. Ms The author also added that supply of manufacturing beef will decrease if the number of dairy conversions and rate of herd expansion increases as a result of the buoyant international market.

 

New Zealand can look forward to the North American market, according to the report, which cites higher US protein and domestic fed cattle prices as key factors increasing the competitiveness of imported product.

 

Despite the fall in New Zealand manufacturing beef exports to its traditional US destination over the last five years, this market is expected to strengthen over coming years, according to the report.

 

The second half of 2006 saw the US experience drought in many of the cow-calf producing areas, resulting in an increased slaughter of cows and reduced domestic manufacturing beef prices.

 

Moynihan added the increased 2006/07 cow slaughter in the US and the high feed grain prices is seen to limit herd and beef production growth in the US in the medium term.

 

Increased US beef prices and an easing of demand for New Zealand beef in Japan and Korea should see exports to the US increase over the medium term, she said.

 

Moynihan stressed that New Zealand's advantage in the US market will depend on the number of factors such as the level of exports from Uruguay, the US' relaxation on Canadian cattle imports and boxed beef from animals over 30 months and Argentina's eventually access to the American beef market.

 

The Rabobank report states developing countries are experiencing rapid growth in meat consumption, primarily pork and chicken but also beef, as incomes and population continue to grow.

 

Referring to the OECD - FAO Agricultural Outlook 2006-2015, the report said that developing countries, particularly those in the Asia-Pacific and Latin America, will see a compound annual growth rate (CAGR) for beef consumption over the next decade of 2.78 percent, compared to 0.49 percent for developed nations.  Moynihan said this could translate to beef consumption by developing countries to 48.4 million tonnes by 2015 compared to 28.3 million tonnes in developed countries.

 

And although the OECD-FAO report also projects growth in supply from low-cost producers to these countries, the Rabobank report said there is a growing middle to high income group willing to pay for what they consider a "quality" product. This segment, the report says, presents an opportunity for New Zealand beef producers.

 

As increased market access for US beef in North Asia squeezes the market share gained in Japan and Korea since 2003, New Zealand exporters are expected to expand shipments into alternative markets, many of which are also open to beef from South America, including Brazil - the world's largest exporter of beef in 2006.

 

While an increase in the value of the Brazilian currency and internal competition for land and capital resources means that Brazil is not expected to match the incredible rate of growth witnessed over the past decade, Brazilian production and exports will continue to grow.

 

Moynihan said New Zealand must closely monitor Brazil's beef sector as it has the difficult task of reacting to market events and issues impacting competitors, rather than exerting any primary influence on the world beef market itself.

 

Rabobank New Zealand is a part of the international Rabobank Group, the world's leading specialist in food and agribusiness banking and operates in 42 countries with moire than 1,500 offices and branches.