Fonterra’s $3.2b capital return to farmers set to boost rural incomes and NZ economy
According to ASB, Fonterra's plan to sell it's Anchor and Mainlands brands could inject $4.5 billion in additional spending into the economy.
As a result beef prices are climbing fast; P2 steer prices are making records for this time of year, says ASB senior rural economist Nathan Penny.
“If this trend continues, P2 prices may lift above 2015 record highs of $6.14/kg,” he says in the ASB Commodities Weekly report.
The Chinese market is dominating demand for NZ beef exports, which overtook export volumes to the US for the first time on record.
More Chinese consumers are opting for beef because African swine flu has decimated their pork industry and those consumers want other proteins including beef from NZ, Penny says.
The US-China trade war is also restricting two way agricultural trade between the US and China.
“While China does not import a large amount of US beef, it relies on the US for a large proportion of its feed inputs for domestic beef production,” Penny said.
“We anticipate these factors will continue to underpin Chinese demand for NZ beef. So we anticipate the 2019-20 season will eclipse 2015-16 in average beef prices for the year.”
ANZ agriculture analyst Susan Kilsby agrees the China demand will keep international markets for beef strong.
“China is continuing to buy beef in large quantities from a range of countries as it looks for alternative protein sources to replace a portion of its domestic pork supply. African swine flu continues to plague pig farms in China and surrounding countries.
“The disease is far from under control and has a high mortality rate. It is likely to hamper China’s pork industry for years.”
Hence the opportunity for international beef suppliers to fill some of the gap caused by China’s lower pork production.
Beef is gaining space on restaurant menus, and beef restaurants are popping up in major cities, boding well for demand from China, says Kilsby.
