Red meat prices are showing signs of recovery, according to Dan Boulton, the chief executive of Silver Fern Farms.
Boulton noted that prices have “come off the bottom of the cycle,” suggesting a potential turnaround for the industry after a challenging period marked by losses and market fluctuations.
The New Zealand meat industry has faced considerable challenges over the past year, primarily due to soft demand from China. Exports to China fell by 50% in August compared to last year, totalling $107 million.
Australian products also flooded international markets, which affected prices.
Meanwhile, the United States emerged as the largest market for New Zealand meat during the same period, with exports increasing by 7% year-on-year to $198 million.
The downturn in prices has severely impacted Silver Fern Farms, which reported a $24.4 million loss for the 2023 financial year, with revenue dropping by $500 million (15%).
Despite these setbacks, Boulton remains optimistic about future price improvements. He highlighted that while the Chinese market is currently subdued, it still represents a $3 billion opportunity for New Zealand’s meat sector.
China is re-entering the market, Boulton said. “They’re being competitive, and that’s a really positive sign.”
Moreover, the growth in the Middle East was described as “just eye-watering,” which is considered a positive challenge to have.
The United States is robust due to reduced domestic production. This situation is expected to bolster farmgate prices for bull beef in particular.
To navigate turbulent times, Silver Fern Farms has implemented cost-cutting measures, removing $80 million from its operational costs this year alone. He also mentioned that capital expenditure has been curtailed to approximately $50 million for the year as part of a broader strategy to focus on essential projects.
“The good news is if we didn’t do all the cost savings… We’d be in a far worse position,” he said.
Looking forward, Boulton identified two emerging global demand models: one focused on sustenance for feeding the growing population and another orientated towards nourishment where consumers prioritise sustainability and ethical sourcing. He believes New Zealand’s producers are well-positioned to meet this demand due to their efficient and sustainable practices.