Continued strong New Zealand beef pricing is largely due to significant lifts in the volume and value of exports to China and the United States during the third quarter, Rabobank animal proteins analyst Blake Holgate says.

Rabobank's latest beef quarterly report said prices moved marginally higher in the quarter and were expected to hold relatively firm in the coming months despite expanding global production generating intense competition.

Stronger-than-expected demand for New Zealand beef in key export markets, combined with restricted domestic supplies and a weakening New Zealand dollar resulted in the marginal increase.

Surging Chinese demand for prime beef cuts resulted in a 21% lift in the value of New Zealand beef exports to China during quarter three in comparison to the corresponding period in 2016.

Advertisement

Exports to the US also increased considerably during the period with total exports up by 11% on volume and 9% on value compared with last year.

Looking to early next year, the report said New Zealand beef schedule prices were anticipated to come off current levels but, provided consumer demand remained strong in China and the US, any fall should not be significant.

An estimated additional 1.3million tonnes of beef would be produced globally in 2018 across major production areas, with the US and Brazil expected to provide the largest production increases.

Chinese import demand growth would play a pivotal role in balancing the global increase in beef exports. Chinese domestic beef production had been falling in line with a gradual decline in cattle inventory.

As a result, there was a growing production gap and Chinese beef imports were expected to increase 20% to 800,000 tonnes in 2018.

China's ability to mop up increased global beef supplies beyond 2018 would, to some degree, depend on the impact of recently-enacted Chinese government policies to promote beef cattle farming.

Investment into the Chinese beef and cattle sector had been limited to date in comparison with other meat sectors. However, the Government had initiated several recent policies to stimulate increased domestic production. The impact of those policies was not yet clear. More time was needed to see if they would be successful, Mr Holgate said.

Listen to Blake Holgate talk to Jamie Mackay about beef prices:

Silver Fern Farms' latest market update said the company's earlier indicated risk to beef markets had materialised over the past fortnight.

The US market was significantly weaker across all lean bull and cow products which reflected the surge in New Zealand grinding beef production with buyers aggressively bidding prices down as they did at a similar time last year.

Alliance Group's latest update on beef said Chinese trade for arrival pre-Chinese New Year had been solid and prices had been firm but post-Chinese New Year interest was reduced.

US trade had been weaker after Thanksgiving. The general trend had been downward as volumes from New Zealand and Australia were rising. Good supplies of lower priced South American beef were making New Zealand beef less competitive.

Domestic New Zealand chilled trade remained buoyant. Retailers were struggling with the firmer prices on both New Zealand lamb and beef as the NZ dollar weakened.