MARKETS | CHINA
Flexibility vital in unpredictable China WORDS: TIM FULTON
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nternational trade friction and domestic policies are keeping exporters alert in China. North Asia, dominated by China, is New Zealand’s largest market region for sheepmeat by volume and second largest by value. In 2017/18, the region imported 48% of NZ’s total sheepmeat exports for the year. But overall NZ was a small player in China’s sheepmeat trade, Alliance Group general manager, sales, Murray Brown said. “When you step it back, New Zealand’s only 3% of their sheepmeat consumption so it’s important in New Zealand’s view, but China, not so. It just shows the power and the size of the market.” A 2017 report for the Ministry for Business, Innovation and Employment, An Investors’ Guide to the New Zealand Meat Industry, said China had gone from producing a fifth as much lamb as NZ 40 years ago to more than four times as much today. However, the report concluded China was a growing customer and unlikely to be a threat in key markets within the medium term. Supply was primarily counter-seasonal lamb for consumption around the time of traditional religious holidays (Christmas, Easter and the end of Ramadan). Lamb production was flat-to-falling in these key
Thousand tonne
160
markets and lamb consumption per capita falling due to an increasing price gap with other more efficient meats, like chicken. NZ’s four lamb meat processors accounted for 70% of export volume, the report said.
‘You’ve just got to be very flexible and understanding that there can be complications created by some very quick decision-making within their country.’
Brown said the China market was steady but the trade war between the United States and China was creating challenges with US pork being forced out of China due to higher tariff rates being introduced for imports. The volume of pork staying in the US could mean downward pressure on all proteins including sheepmeat, he said. It was also becoming harder for some Chinese manufacturers to process products like wool and casings because of a downturn in demand and government moves to control industrial pollution. Some hide and skin plants had been closed and other manufacturing had also been
NZ lamb & mutton exports to China/HK (Oct - Jul)
120 80 40 0
Country-Wide Sheep
2007-08
2009-10
October 2018
China
2011-12
2013-14
Hong Kong
2015-16
2017-18
Source: B+LNZ
China is a growing customer for New Zealand lamb.
affected. It was a reminder that China could be unpredictable. “You’ve just got to be very flexible and understanding that there can be complications created by some very quick decision-making within their country.” Silver Ferns Farms general manager, sales, Peter Robins, said China was holding up well but exporters were wary of a USChina trade war. China devalued its currency 7% against the $US as a first step in the economic battle. Devaluation meant importers paid more for their products, which could eventually put downward pressure on pricing. China’s domestic kill had been quiet and consumption remained strong, although in-market inventory was reported to be building and this could quieten the market, Robins said. RaboResearch general manager Tim Hunt said China was an opportunity for NZ because it was poor in arable land and water relative to its population; it prioritised rice and wheat over red meat production because of a history of food embargoes and famine, and it was highly conscious of food safety as a result of the melamine crisis a decade ago. As red meat consumption grows in China, much of it would be met by imported product. NZ should be able to win a solid share of that business, including sales of offal and secondary cuts. This would help exporters to receive good value for the whole sheep rather than just premium cuts, Hunt said.
IN THE NEXT ISSUE: A British report has raised concerns about Chinese demand for sheepmeat as China becomes more self-sufficient.
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