New Zealand consumers are getting squeezed as Chinese buyers scour the world for animal protein, pushing up prices after African Swine Fever decimated Asia's pork industry.
China's pig herd has shrunk by about a third since the first outbreak of the disease was reported in mid-2018. Global meat prices have soared in response with the Wall Street Journal reporting that retail prices for chicken breasts, thighs and legs have increased roughly 16 per cent in Brazil. Europeans are on average paying 5 per cent more for pork and Australians are paying 14 per cent more for lamb.
Statistics New Zealand figures today show the nation's September food prices lifted 2.2 per cent from a year earlier. That was largely due to meat, poultry and fish prices rising 5.3 per cent, with a number of cuts and meats notching up records in recent months.
About 85 per cent of New Zealand's red meat is exported, meaning domestic prices are linked to the global market.
"The bulk of our meat is exported so yes, the export price does underpin the price New Zealand consumers have to pay for beef as well," said ANZ agriculture economist Susan Kilsby.
"In countries that have larger domestic markets, export prices have a lesser bearing on what their local consumers have to pay, but here in NZ we have to pay international rates to secure domestic supply," she said.
According to Stats NZ, the weighted average price of lamb chops, blade steak, and bacon all reached record highs in September. "This follows previous records for bacon in August, lamb chops in July, and blade steak in June and July."
In relation to exports, ANZ's Kilsby said China has now become New Zealand's largest trading partner for beef, reducing reliance on the United States. Manufacturing grade imported bull and cow meat is trading at record prices in the US and prices have remained strong throughout the winter months as US buyers have had to compete with demand from Chinese buyers, she said.
"This is not a situation which the US buyers are used to, as traditionally they have been the dominant buyers," she said.
China's appetite for lamb and mutton also remains strong as they look for alternative protein sources to fill the void in domestic pork production, she said.
The September lift in New Zealand food prices was also influenced by increasing prices for restaurant meals and ready-to-eat food, up 3.3 per cent.
"Rising prices for takeaway foods, like pizza, which is up 5.8 per cent, contributed to the overall annual food price increase in the year ended September," Stats NZ's Johnson said.
Food prices were unchanged from August.
The food price index accounts for about a fifth of the consumers price index, which is one measure the Reserve Bank uses to pursue its inflation target when setting interest rates.
The central bank is mandated with keeping inflation between 1 and 3 per cent with a focus on the midpoint. Annual inflation is currently running at 1.7 per cent. The bank is widely expected to cut rates by a further 25 basis points in November to a record low 0.75 per cent.
Separately, Stats NZ's new measure of rental price inflation remained steady in September.
It draws on Ministry of Business, Innovation and Employment tenancy bond data, replacing a quarterly survey of landlords. It also feeds into the CPI.
The 'stock' measure shows rental price changes across the entire renting population, whereas the 'flow' measure only captures dwellings that have a new bond lodged against them.
The national stock rental price index for September rose 3.4 per cent from the same month a year earlier, following an annual increase of 3.4 per cent in August. It rose 0.2 per cent in September from August.
On the flow basis, rental prices rose 4.1 per cent on the year in September after lifting 4.3 per cent in August. It was up 0.3 per cent on the month.