Opportunities seen in Chinese market

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The prospect of chilled beef access in China presents a key opportunity for New Zealand exporters to gain a foothold in the higher-value segment of the market, Westpac economist Sarah Drought says.

On the supply side, the volatile climate and growing environmental constraints would hold back the response in global supply which should help to avoid the over correction in prices seen in the past.

Writing in the Westpac Agri Update, Ms Drought said Asia was the main destination for New Zealand's prime beef exports and China was by far the fastest growing market.

China's total beef imports rose a ''whopping'' 22% in 2016, seeing it become the world's second largest beef importer.

Strong growth in imports was expected to persist this year. In China, per-capita beef consumption was low, but urbanisation and rising incomes were expected to underpin growing demand for premium beef.

''But despite this rapid rise in demand for foreign beef, in-market prices have been coming under pressure due to increased competition as more countries are granted market access.''

The re-entry of Brazil into the Chinese market in 2015 had been significant, as Brazil had captured the lion's share of China's growth in imports last year, Ms Drought said.

However, a developing scandal about Brazilian suppliers selling tainted meat had resulted in China and other countries suspending imports from Brazil.

While much would depend on how long the suspensions lasted, tighter supply, especially in China, where Brazil was such a big player, would create opportunities for other beef suppliers, including New Zealand.

With a ban on some United States beef products removed last year - implemented over mad cow concerns back in 2003 - US suppliers could benefit from the potential supply gap in the Chinese market, she said.

Despite steady growth in demand, other large import markets, including South Korea and Japan, had also been under pressure of rising supply. In those markets, it had been US beef suppliers seeing strong growth and increasing their foothold, Ms Drought said.

Rising beef supply was expected to place prices under pressure in the coming year, but solid fundamentals remained in place to support prices at higher levels than those seen in the 2000s.

On the demand side, the growing middle class in China and elsewhere in Asia, and continued liberalisation in trade access, would bolster global demand. There was a risk of a swing back to more protectionist policies which would cloud the demand outlook.