We are well and truly in winter mode with our factories going through rolling shutdowns. This allows us to carry out general maintenance and implement any capital project work. As you are aware there are many moving parts in a meat plant and reinvestment is critical to ongoing smooth operation.
The North Island bobby calf processing period began at our Moerewa site (our Northland plant) in late June and at the time of writing this report we are now processing calves at Rangiuru (our Bay of Plenty site) and Horotiu (our Waikato site). Imlay (our Wanganui / Manawatu site) will open next and then the two south island plants will come online. This follows seasonal calving patterns.
Thanks to all our dairy suppliers who had their bobby calf registrations in early and to our North Island suppliers who are using the new bobby calf app. This app allows the plants to plan and manage throughputs.
Lambs are starting to be booked in for processing after a very slow January and February. Unusual volumes of rain in the North Island through the summer months coupled with low sunshine hours meant lambs were slow to finish.
There is a capacity pinch towards the end of July and into August as bobby calves peak, but we expect to have enough capacity on hand to manage our ovine kill as well.
Cattle volumes are at their seasonal lows now until the new season kicks off in earnest in November.
It would be nice for all our suppliers to have a break from the rain but there is talk of El Nino conditions building. It could be a case of out of the frying pan and into the fire, but we expect our suppliers will take it in their stride, as by and large they are a resilient bunch!
The biggest issue we are currently facing is strong headwinds in our international markets, with a significant reduction in demand and pricing, particularly from our biggest market China. Our below market update provides a full outline of this.
Take care out there as we move through Winter and into Spring.
RegardsTom and Nigel
The 2023 North Island bobby calf season has seen the introduction of the Bobby Calf website based app. This new system, is the only way we can receive bookings in the North Island for this season- it will allow for a much more streamlined approach to managing throughputs at plant, and for our carriers. Just a reminder if you are having difficulty getting set up, there is a FAQ section on our website.
China’s demand for Beef has softened significantly, leading to lower pricing returns over the last few months with export prices now closer to the 5-year average than last year’s peak. There was a lack of confidence in markets at the SIAL Tradeshow in China held in May which has persisted. Consumers in China have switched from spending to saving resulting in less spend at restaurants and trading down from premium Beef to a now restored Pork supply as Swine Flu has been managed. Pork has now returned to 2019 price levels following a 150% increase.
There is simply too much inventory for the suppressed demand with the US, Brazil and Australia all producing high volumes. AFFCO is focused on maximizing returns from other markets. As for a turning point in China, it is hard to know when this might be. However, the buy-in for Chinese New Year usually provides a stimulus.
The USA grinding meat market is following a similar trend. The outlook, however, is more positive as the price of domestic stock rises, importing from NZ becomes more attractive. AFFCO USA is working closely with their local partners to deliver the best result.
Lamb export pricing remains below the 5-year average and the outlook is not a positive one. Pricing on all key items has fallen in recent weeks and whilst the hope is we’re at the bottom, there is no guarantee.
Whilst hopes the off-season will improve the supply-to-demand equation, Australia is supplying a record amount of frozen sheep meat to a suppressed market with underlying economic challenges. Australia has increased its slaughter even more over the past 8 weeks (across May and June) suggesting the current situation will continue for the foreseeable future.
China Flaps have reached a record-low price and the lack of buyer confidence has spread throughout Asia limiting options to sell. Globally, the lack of confidence is shared in the key markets of the UK, France, and Germany. UK imports from NZ are down 41% versus a year ago whilst Australia’s decline is modest. Middle cuts such as Racks are holding demand however AFFCO is changing markets on Legs and Fores to maximise the value we can return to farmers.
It was great to see so many of our valued suppliers from all over the country at the recent National Fieldays at Mystery Creek. We value all of our suppliers and enjoy being able to have a chat over lunch.