Irish beef needs to ‘proceed with extreme caution’ in turbulent Chinese market – Goodman

Irish meat exporters need to proceed with extreme caution when dealing with the Chinese market, which is currently going through some turbulent times – particularly in beef – according to managing director of ABP International Mark Goodman.

Speaking to AgriLand, Goodman gave an insight into how things are in Shanghai at present, highlighting in particular a sharp downturn in beef sales in the Chinese market and an increase in available supplies of both beef and pork.

He stressed the importance of slowly developing sustainable outlets with value-added offerings – with a stark warning that commodity trading round cuts and forequarters need to be given a wide berth.

Beef in freefall for fourth quarter

Commenting on beef and how the product has fared in recent months, the managing director said:

“Beef imports to China in 2018 stood at one million tonnes. In 2019, this is forecast to hit a record 1.5 million tonnes.

Prices have been hugely volatile with forequarter from South America reaching highs of $6,500/t in Q3. However, in Q4 the market is currently in a crash.

“In the last three weeks, beef forequarter import prices to China have dropped on average by $2,000/t (€1.81/kg) and continue to fall,” Goodman said.

The reason for this, he continued, is due to over-speculation on the part of Chinese importers in second and third quarters of 2019.

“Importers felt that the increased pork price would lead consumers to switch to beef. Whilst there has been some switching, the demand for beef has not matched the imports and so Chinese importers now find themselves with too much stock of beef and huge cash-flow problems.

They are having to release beef onto the market at any price. Many South American packers have dropped their offer prices and are here in China this week renegotiating contracts for beef which has been shipped in the last three weeks.

Outlook for Irish Beef in China for 2020

Explaining how this turbulent market will affect Irish beef exports destined for the Asian nation in the coming year, Goodman noted the recent batch of Irish plants cleared for export, but cautioned about the uncertainty around the market:

“Irish packers and the wider farming supply base need to be very aware that the Chinese market is volatile and Irish beef has to compete with cheaper supplies from Brazil and Oceana.

“Herd eligibility is also a limiting factor for Irish packers – factories are reporting that only 35-45% of their total weekly kill is China eligible. This is mainly due to TB restrictions written into the protocol.

The Irish industry needs to proceed with extreme caution and slowly develop sustainable outlets with value-added offerings. This will take time.

“If the Irish beef industry gets into commodity trading round cuts and forequarters into China, it will end in disaster if/when the market falls,” Goodman concluded.

China is currently Ireland’s fifth-biggest market for agri-food exports and has grown significantly over the years. Total agri-food exports amounted to almost €800 million in 2018.

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