A lengthy run of record-high prices for New Zealand's red meat could soon be coming to an end, as the COVID-19 pandemic continues to impact the global restaurant trade.
The international food service sector is predicted to have a "slow and uneven recovery" in 2021, which, combined with weak global conditions, is set to lead to lower demand for higher-value New Zealand red meat cuts, according to a new report by Rabobank.
The report - Global Animal Proteins Outlook 2021: Emerging from a world of uncertainty - predicts New Zealand beef production will remain flat in 2021 while "the long-term trend of declining New Zealand sheep supplies would continue".
"As we all know this year there's been pretty severe disruption in many aspects of life because of COVID and the impact on food service - that sales channel where those high value cuts go through - has certainly been impacted and we see that continuing into next year as we see some countries and regions across the globe struggle to get on top of COVID and continue to have some form of restrictions in place," said the report's co-author RaboResearch protein analyst Blake Holgate.
"So once you combine that with slowing economic conditions in a number of key markets, we do see that bringing down the demand in pricing for higher-value cuts, which obviously impacts the overall carcass value. But within context we don't see those prices of New Zealand lamb or beef dropping off significantly, more reverting to a five-year average price," Holgate told Dominic George on Magic Talk's Rural Today on Tuesday.
Holgate said while "white tablecloth restaurants" in the United States had been and would continue to be severely impacted by lockdowns, there was "less of an impact on the quick service trade", including brands such as McDonald's and Pizza Hut.
"We're actually seeing demand for that manufactured beef product, which makes up a big portion of what ultimately we get for our beef prices, is actually holding up relatively well. And we'd expect that to continue into 2021 in that US market."
Holgate said China's recovery from African swine fever (ASF) would also have an impact on New Zealand meat prices.
"One of the main drivers over the last two years of that record pricing has been the impact of African swine fever on pork production in China. Now we are anticipating for the first time in two years for year-on-year pork production in China to start increasing again as their herd rebuilding is now well underway. So that's starting to erode some of the gains we've seen out of that market.
"Now there's still a huge amount of demand and pork production is still well back on where it was two years ago but it's just starting to reverse that trend that we have seen for the last two years out of that market."
The report also identified Brexit as a "key trade issue" that could end up being either positive or negative for New Zealand, depending on its outcome.