China sheep and beef meat trade back to pre-Covid levels
Big dip in demand from North America and Europe markets still fighting virus
The New Zealand-China meat trade has returned to precoronavirus levels but markets in North America and Europe have been hit hard by the pandemic, Invercargill-based Alliance Group says.
China last year become New Zealand’s biggest export destination for sheep meat and beef, by volume and value, but exports plummeted early this year when Covid-19 restrictions kicked in, hitting the food-service trade to restaurants, and supply chains within the People’s Republic.
Alliance, a farmer-owned cooperative, is New Zealand’s biggest sheep meat exporter and the second biggest meat exporter after Dunedinbased Silver Fern Farms.
Chief executive David Surveyor said trade with China was back to where it was before the outbreak .
“China is going well. It is in a good space,” Surveyor said.
“You have seen some relaxation of the people movement issue and we have seen good, solid demand for ovine (sheep) and bovine (beef) product,” he said.
New Zealand continued to be a trusted source of food supply in China.
“So there is really good sentiment for us going forward in China,” he said.
Surveyor said there was a risk that other meat exporters might lift their export efforts to China as demand in their home countries slumped, which could put pressure on prices.
“We are not seeing that at the moment, but it’s certainly possible.
“I think that we are back to where we were (in China) beforehand. If you go to broader Asia, we are doing pretty well — it’s been a positive story for the Alliance Group,” he said.
However the same could not be said for another key market, North America, where Covid-19 is still spreading and where unemployment is skyrocketing.
“The challenges really are in North America,” he said.
Alliance sells high-value products, such as racks of lamb, to the US.
“When the market for those starts
You have seen some relaxation of the people movement issue and we have seen good, solid demand for ovine (sheep) and bovine (beef) product. David Surveyor, Alliance chief executive
to get skinny, that obviously affects the value of the entire animal as it flows through to farmers,” he said.
Trade in Europe was slow as many countries were struggling to get the coronavirus under control.
Food service globally had slowed right down as people opted to stay away from restaurants.
Surveyor said some of Alliance’s farmer-members had opted for minimum price contracts, which meant in some cases farmers were being paid sums higher than the current market price.
Alliance had made sure its plants kept processing, albeit at a slower rate due to Alert level 4 restrictions.
The co-op had also extended its advance payment programme to protect farmers cashflows by a month.
It has also done away with penalties for sending in stock that are above the 17-23kg weight band — in recognition that farmers have had hold on to their lambs longer than they would like.
There was a processing backlog of one to two weeks in Alliance’s North Island works due to level 4 social distancing restrictions.
In the South Island, the backlog was four to six weeks.
Under level 4, processing capacity was down 60 per cent for sheep meat and 30 per cent for beef.
“It’s a very inefficient way of running the plants, and much more expensive.”
He said it was not yet clear how operations would change when the country moves to alert level 3 next week.
Various countries going into lockdown had put pressure on Alliance to find new markets.
“As we see the world slowing down with Covid-19, if the supply chain gets blocked or people stop taking product, then the risk is that animals might end up staying on the land — that’s the real concern.”
“We have just got to be very agile in finding new markets so that we can keep livestock flowing.
“We need to make sure that we can keep people in jobs, no matter how things unfold.”
Alliance has taken advantage of the Government’s wage support packages to the tune of $34 million.
To qualify, companies needed to prove that their revenue had fallen 30 per cent or more as a result of Covid-19.
Surveyor said the scheme had saved 1000 jobs.