Why pressure could be coming on NZ’s record high meat export prices

Global market economic crunch could erode demand for New Zealand exports this year. Photo / Supplied

Historic high prices for New Zealand meat exports look set to slip this year due to softening global demand and difficult economic conditions in some key markets.

Sirma Karapeeva, chief executive of the Meat Industry Association which represents the $10 billion export sector, said over the past two years global prices and export values had been historically high but the industry was seeing an easing in demand and pricing.

“...We are seeing a softening of demand and pricing with the difficult economic conditions in some of our key markets,” she said.

“China has made a rapid move away from its zero-Covid-19 policy and it is still uncertain what this will mean for demand for meat in China and the impact on the global meat trade this year, as China is the world’s largest meat importer.

“In some countries, high inflation is affecting consumers’ purchasing power and confidence. The impact will potentially be most significant in the UK, US and EU, where consumers are also having to deal with the impact of high gas prices, which reduces disposable income.”

Chinese demand for beef and sheepmeat should remain as there had been a degree of permanent shift from pork to other proteins, particularly to beef, during the African swine fever crisis, she said.

“However, this does depend on the impact of the changes to China’s Covid policies and whether or not the Government will re-impose any restrictions.

“US consumption of both beef and sheepmeat was very high in 2022. However, the demand outlook for 2023 is weaker, given consumer sentiment and likely reaction to economic conditions.”

Meat Industry Association chief executive Sirma Karapeeva. Photo / Supplied

Recent US surveys had shown that inflationary pressure on income was real and that US consumers were looking to prepare more meals at home, meaning potentially there would be less demand in the food service sector, Karapeeva said.

New Zealand exports 90 per cent of its meat production. The meat industry is New Zealand’s largest manufacturing sector, employing 25,000 people at more than 60 locations nationwide. It processes around 25 million sheep and five million cattle a year.

Karapeeva was responding to a Herald report that the freight forwarding industry had noticed a decrease in export handling inquiries for this time of the year.

Customs Brokers and Freight Forwarders’ Federation (CBAFF) spokesman Chris Edwards said he only had anecdotal evidence of a reduction in export demand, and noted New Zealand was just coming out of the holiday season, but “certainly the inquiry level is lower than I would expect it to be.”

Fonterra, the heavyweight of New Zealand’s $20 billion dairy export industry, said it continued to see “normal” levels of demand.

“Our current contract and committed rates are in line with recent years,” a spokesman said.

Indications that tougher export times could be ahead come as CBAFF expressed concern about an “unprecedented” number of empty containers awaiting shipping out of the country.

Edwards understood there were as many as 40,000 empty containers awaiting evacuation by shipping lines.

The issue was heaping more costs on importers who had already seen a big rise in their shipping and port costs, he said.

A number of empty container “de-hiring” yards were not releasing booking slots for the return of an empty import container. If an importer can’t return a container within a certain time period because these sites are full they have to pay a “detention” charge.

The problem is not new, at the height of the pandemic there was an identical issue - but for a completely different reason, CBAFF said.

At that time importers and exporters were a lack of space and services to evacuate the containers from New Zealand led to a high empty container inventory.

This time round the problem was being attributed by some to new players and more vessel calls building the inventory.

“The solution however remains the same - the empty containers need to be evacuated onto ships leaving New Zealand.”

Edwards noted the supply chain “crisis” of the past two years had not led to an immediate investment by players in the sector in new infrastructure, which would have alleviated some of today’s empty container problems. Sites serving the ports of Auckland and Tauranga remained at full capacity.

The congestion led to several problems for importers trying to return containers. They included: frustration as containers sat in warehouses waiting for collection while trucking companies in turn waited for a “de-hire” slot; detention charges from shipping lines for containers that couldn’t physically be de-hired; space issues for smaller importers with limited storage room leading to additional costs when storage yard space had to be hired. There was also often a significant administrative cost to dealing with the log jam.

Edwards said the problem also created a reduction in export containers suitable for exporting. Many containers were not suitable for exporting, especially food-grade products, he said.

CBAFF was aware several shipping lines planned to do larger container evacuations in the next few weeks.

Shipping company Maersk confirmed to the Herald that empty container stock was higher than normal.

Head of Oceania Export Market My Therese Blank said this was due to increased container returns during December and this month.

However, all of Maersk’s empty container park operations remained open for returns and the company was increasing empty container storage capacity temporarily. It also planned additional empty container exports in the coming weeks.

Cosco Shipping Lines general manager Mark Scott said while he couldn’t comment on the overall inventory situation, he understood the evacuation of surplus empty boxes was a continual challenge “due to the congested nature of the overall New Zealand supply chain”.

Cosco had strict policies to ensure container inventories in this country were kept at an optimum level similar to previous years by equalising outbound loadings with inbound volume.