A new report paints a rosy outlook for New Zealand red meat producers, largely due to the impact of African Swine Fever (ASF) in China.
Rabobank's just-released Global Animal Protein Outlook 2020 says ASF is expected to continue to restrict global growth in animal proteins, meaning New Zealand red meat producers can look forward to continued strong pricing for their beef and sheepmeat exports in the coming year.
The report says while production growth is expected in most regions in 2020, "the impact of ASF in Asia overwhelms the outlook", as China's production losses exceed the growth in all other regions combined.
Chinese pork production is expected to decline by a further 10 to 15 percent from 2019 levels and, while less than the decline in 2019, the report says it will ensure 2020 production is well below the 2014-18 average, prior to the major ASF outbreak.
Pulling down overall growth, the report says, ASF brings uncertainty to the global animal protein outlook alongside trade disputes, sustainability developments and the ongoing rise of alternative proteins.
Rabobank animal proteins analyst Blake Holgate said the pork supply gap created by ASF had been a key factor in the surge of New Zealand beef exports into China during 2019, and this trend was set to extend into 2020.
"Another significant jump in Chinese demand for New Zealand beef products is forecast over the next 12 months, further cementing China's recently-acquired position as our largest export market for beef products. And, with this growth continuing to put upward pressure on export returns, we expect to see farmgate pricing at levels equal to, or above, those received in 2019," he said.
"In the US - our second-largest market for beef - we also anticipate good returns in 2020 due to a combination of limited availability of New Zealand beef supplies and an expected easing of the New Zealand dollar."
According to the report, New Zealand's beef production is expected to increase marginally in 2020, lifting by approximately two per cent.
On the sheepmeat front, the report says New Zealand farmgate prices are forecast to remain at record levels, while production is set to increase slightly.
"In-market pricing for New Zealand lamb is expected to remain firm in most key export markets during 2020 and any favourable movement in the exchange rate is likely to push export returns higher," said Holgate.
"As with beef production, we expect to see a very slight lift in New Zealand sheepmeat production with slaughter numbers in 2020 anticipated to increase to around 19 million head."
Despite the largely rosy outlook for New Zealand's red meat producers, the reports says freshwater and climate change reforms pose a key challenge for the sector in the year ahead, while the Brexit process looms as another potential downside risk which could result in reduced access to the UK/ EU market.