Future Trends in Lamb and Beef Markets: Expert Insights with Angus Gidley-Baird

This week on the Head Shepherd podcast, Mark Ferguson and Angus Gidley-Baird , Senior Analyst - Animal Protein at Rabobank, dig into the key differences between the Australian and New Zealand red meat markets and how they play out in the price paid at the farm gate, as well as in our on-farm decision-making.?

First up, Ferg and Angus put the spotlight on the differences in market prices between Australia and New Zealand. Angus emphasises two important factors that help to explain the current differential in the prices being paid to producers on each side of the ditch:

1. “Australia exports about 65% of our lamb production. New Zealand is up around 85%, as I understand. So we've got a much bigger domestic market that can absorb things,” says Angus. “If the Australian domestic consumer is buying more, then it means that those exporters (or the processors and exporters) aren't having to push as much into an export market.”?

1. “Australia effectively has … four large markets,” explains Angus. “We've got a domestic market that takes about 30-35%. We've got the Middle East, China and the US who, last year, all took about 13% of our overall production. So, we've probably got a few more markets - large markets - to take that product, as opposed to New Zealand, which is very export-focused and very China- and Europe-focused.” Angus points out, “China is particularly soft at the moment ... It's generally not a high price paying customer anyway, but it does take large amounts of volume … The challenge … is the large exposure New Zealand has to that market.”

When it comes to the influence that different market signals have over our on-farm decisions, it’s clear that carcass weights in both countries are increasing. Angus reflects, “ … our average slaughter weight for quarter one this year was up above 24 kilos .. five years ago it was 23 and 10 years ago it was 21, so it's an ever-increasing plane at the moment of increased weights and … the pricing grids are not penalising people for those sorts of weights … But I don't know whether this desire to chase weight is necessarily the best thing for the market.”?

Angus continues, “A question for the retailer is are we going to ask our consumer to eat a bigger product? Are we looking for a bigger eye muscle? Are we looking for a bigger lamb leg? Or are we just going to start trimming this stuff off? … Are we going to turn it into - like the US does - hamburger trade?”?

Pointing to the greater importance of the UK and European markets to New Zealand, with their preference for more traditional cuts, Angus highlights that “ … New Zealand lamb carcass weights haven't increased as much as, say, Australia's ones, where we're sending a lot more to that US market.”?

What does all this mean in the longer term??

Angus cautions producers “ … to be conscious of what that actual consumer wants.” To position red meat as a premium product, both Australian and New Zealand producers need to be, “ … acutely aware as to what that customer is actually looking for and make sure you supply that rather than trying to push volume into the market.” In this, Angus sees opportunities for the marriage of technology and marketing - using objective quality measures - to ensure that consumers around the world get a consistently high-quality eating experience every time they enjoy our lamb and beef.

For someone whose job involves a fair bit of crystal ball-gazing, Angus’s response to Ferg’s final question, “What’s the last thing you changed your mind about?”, is unsurprising! The vagaries in the market - particularly the unexpected changes in the Australian lamb price this year - have had Angus scratching his head and rethinking his predictions. But whatever changes the markets bring in the coming months, Angus sees many opportunities ahead for red meat producers on both sides of the Tasman.?

To hear the full conversation, tune into the Head Shepherd podcast wherever you listen to your podcasts.?

For more from Angus and the team at Rabobank, check out the RaboResearch Food and Agribusiness Australia and New Zealand podcast.?