TL;DR:
- The anticipated increase in lamb prices during the Chinese New Year did not occur, with sales remaining subdued.
- Economic challenges in China, including deflation and a weak property sector, have led to cautious consumer spending, affecting the demand for New Zealand lamb.
- Despite these challenges, there are signs of a potential increase in sales post-Chinese New Year, and markets in other regions are performing better than expected.
The Chinese New Year, celebrated on February 10 this year, usually brings family gatherings and increased food consumption, including lamb. However, this year, the expected boost to lamb prices did not happen.
Dave Courtney from Silver Fern Farms noted that the sales during this period were subdued, a sentiment echoed by AgriHQ senior analyst Mel Croad, attributing it to the sluggish Chinese economy impacting high-value product sales like meat.
China, which accounted for 56% of New Zealand’s sheep meat exports last year, saw lamb prices drop by about 25% compared to the previous season. The economic downturn, marked by deflation, a struggling property sector, and high local government debt, has made Chinese consumers more cautious.
Despite this, China remains a crucial market for New Zealand exporters, offering the flexibility to move volumes and create price tension in other markets.
James McWilliam from the Alliance Group highlighted that consumer demand in China remains weak due to cost-of-living pressures and stagnant incomes, particularly affecting the food service sector. The market is also facing competition from cheaper South American beef and large volumes of Australian mutton.
However, there are early signs of increased sales activity post-Chinese New Year, which exporters hope to capitalise on to boost consumption.
The Chinese economy faces several challenges but is showing signs of recovery, with a 5.2% growth last year, surpassing the government’s target. Despite a modest increase in sales during last November’s Singles Day, the largest e-commerce sales festival in China, consumer confidence remains low. The New Zealand Foreign Affairs and Trade report highlights the ongoing economic transition in China but notes the potential of the middle-class market for high-quality food.
As New Zealand begins to experience drier conditions and declining feed quality, stock flows are expected to accelerate.
The fundamentals of China as New Zealand’s largest export market remain strong, despite the current headwinds. With the Chinese government implementing stimulatory economic policies, there is hope for stabilising the property market and encouraging consumer spending, which could benefit New Zealand exporters in the long term.
