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The Muster- Simon Quilty: Red Meat Predictions · The Muster on Hokonui

• 0:12
  Speaker 1: Simon Quilty of Global Ag Trends gets us underway this
• 0:16
  Speaker 1: afternoon on the muster. A few of you were up
• 0:18
  Speaker 1: at the Beef and Lamb Out the Gate conference recently.
• 0:21
  Speaker 1: Simon spoke there. We've spoken to him previously on the show,
• 0:25
  Speaker 1: just trying to get an indication of what the red
• 0:27
  Speaker 1: meat pricing is going to do for the season. Simon,
• 0:30
  Speaker 1: good afternoon. A lot of buoyancy around pricing in the
• 0:33
  Speaker 1: red meat sector at the moment. What's your take?
• 0:37
  Speaker 2: Yeah, Andy, I think the momentum continues from when we
• 0:41
  Speaker 2: caught up earlier in this year, March, April, but also
• 0:44
  Speaker 2: when I was in New Zealand the week before last
• 0:48
  Speaker 2: and the message is that this continues. If I was
• 0:53
  Speaker 2: to best describe where we're heading on lamb, the word
• 0:57
  Speaker 2: rinse or the words rinse and repeat, Andy, is what
• 1:02
  Speaker 2: I like to say. is that next year is going
• 1:05
  Speaker 2: to be very, very similar to this year in terms
• 1:08
  Speaker 2: of how buoyant prices are.
• 1:10
  Speaker 1: Is this due to the global situation and people wanting
• 1:13
  Speaker 1: red meat?
• 1:15
  Speaker 2: I think it's a combination of supply and demand that
• 1:19
  Speaker 2: supply out of Australia, Andy, next year is going to
• 1:24
  Speaker 2: be very, very tight. I see the lamb kill going
• 1:28
  Speaker 2: below $ 20 million for the first time in probably a
• 1:32
  Speaker 2: decade or more And also, you know, there's no real
• 1:36
  Speaker 2: signs of rebuild within New Zealand. You know, your breeding
• 1:40
  Speaker 2: new numbers are down 1.9%. The mutton kill is down
• 1:47
  Speaker 2: a fraction of 0.8% for the season. But overall, there's
• 1:52
  Speaker 2: no clear message that numbers are building. And with tight
• 1:56
  Speaker 2: Australian suppliers, tight New Zealand suppliers, it points to higher
• 2:00
  Speaker 2: prices with good demand.
• 2:03
  Speaker 1: Okay, Simon, based on that, what can we expect for
• 2:05
  Speaker 1: a kilo of lamb this season?
• 2:08
  Speaker 2: Well, I think, Andy, the highs at $ 12. 50 may have
• 2:13
  Speaker 2: come in, but I've got the trading range going between
• 2:20
  Speaker 2: really $ 10. 90 to $ 11 to $ 12. 50. The thing I'm watching closely, Andy...
• 2:29
  Speaker 2: is the findings that are to be handed down in
• 2:33
  Speaker 2: November on this inquiry into tariffs on lamb in North America.
• 2:40
  Speaker 2: So they're looking at whether damage has been done to
• 2:45
  Speaker 2: the US domestic industry. This has been done by the USTR,
• 2:51
  Speaker 2: which is the US trade representative, and they've put together
• 2:55
  Speaker 2: a recommendation to the U.S. International Trade Commission. If that's
• 3:00
  Speaker 2: not a mouthful, I don't know what is. And Andy,
• 3:04
  Speaker 2: those findings, they're doing a study at the moment. They're
• 3:08
  Speaker 2: getting interested parties to give testimony to that to prove
• 3:15
  Speaker 2: whether there's been serious injury or not to the U.S.
• 3:19
  Speaker 2: domestic lamb industry over the last two to three years. Andy,
• 3:23
  Speaker 2: the clear answer is no. Imported has not damaged it.
• 3:28
  Speaker 2: But in this current environment under the Trump administration, you
• 3:33
  Speaker 2: and I can't guarantee anything. So they are pushing hard,
• 3:38
  Speaker 2: the American Sheep Industry Association and ARCAF, for a 30% tariff.
• 3:45
  Speaker 2: So we'll find out in a month's time whether that
• 3:48
  Speaker 2: comes to fruition or I hope not. If it does,
• 3:52
  Speaker 2: it may dampen some of the pricing we're talking about.
• 3:55
  Speaker 1: Will we be able to absorb this tariff from the US?
• 4:00
  Speaker 2: So here's my experience of these type of things in
• 4:04
  Speaker 2: the past. And Andy, I'm a meat trader of 35 years. So,
• 4:09
  Speaker 2: you know, it's probably based on experience that I speak here.
• 4:14
  Speaker 2: But what happens normally is that when supply is tight...
• 4:19
  Speaker 2: as it is, we tend to be able to pass
• 4:23
  Speaker 2: these costs forward to the importer and consumer in America.
• 4:28
  Speaker 2: But once numbers start to appear in Australia and New Zealand,
• 4:34
  Speaker 2: these costs get passed back. And so the producer eventually
• 4:40
  Speaker 2: wears it. So I think in 2027, the numbers will
• 4:46
  Speaker 2: still be tight. I'm probably concerned about 2028, 29, when
• 4:52
  Speaker 2: the numbers start to eventually pick up in supply from
• 4:56
  Speaker 2: both countries. And that's when, if this tariff is in place,
• 5:01
  Speaker 2: it starts to have an impact on pricing.
• 5:04
  Speaker 1: Let's look at cattle. Now, over in the US at
• 5:07
  Speaker 1: the moment, the screwworm situation's occurring in Texas. Tariff-free quotas
• 5:13
  Speaker 1: have been introduced by President Trump. How's this going to
• 5:15
  Speaker 1: affect New Zealand beef?
• 5:18
  Speaker 2: Sure. So let's start with the New World Screwworm. So
• 5:22
  Speaker 2: the border has been opened between Mexico and the US
• 5:27
  Speaker 2: at Douglas is the port of entry. And it's pretty small.
• 5:33
  Speaker 2: They've got one, you might say, port open. The amount
• 5:38
  Speaker 2: coming through is about 0.3% of production influencing in America.
• 5:46
  Speaker 2: When the borders are normally open, Mexico supplies about 5%
• 5:51
  Speaker 2: of U.S. production overall. Best case scenario that some of
• 5:56
  Speaker 2: the borders open this year and next, it's about 2%
• 6:00
  Speaker 2: we're estimating at global agri-trends. Andy, I'm not worried about 2%.
• 6:07
  Speaker 2: I think that it's very manageable and the influence on
• 6:12
  Speaker 2: pricing for imported beef will be minimal. So on the
• 6:18
  Speaker 2: screwworm front, I think the concern about the given access
• 6:25
  Speaker 2: of 300,000 tons by President Trump for a 90-day window
• 6:33
  Speaker 2: is probably a bigger deal. So just for what it's worth,
• 6:37
  Speaker 2: let's reiterate, this was put in place in August in
• 6:42
  Speaker 2: which Donald Trump announced 300,000 tons of of out-of-quota tariff
• 6:48
  Speaker 2: would be enabled to come in. So that would be
• 6:51
  Speaker 2: for September, October, November. In his wording, Andy, if I
• 6:56
  Speaker 2: could just repeat it, this beef will be sold at 25%
• 7:01
  Speaker 2: below current prices. This deal will reduce prices for Americans
• 7:07
  Speaker 2: while giving space for our great American beef herd to
• 7:12
  Speaker 2: grow again. So, Andy, on so many levels, this is wrong.
• 7:18
  Speaker 2: It will not enable the beef herd to grow. This
• 7:22
  Speaker 2: actually saw prices for both cattle and boxed beef in
• 7:26
  Speaker 2: America fall, not enough to the 25%, but if you're
• 7:32
  Speaker 2: going to grow that herd again in America, Andy, you
• 7:35
  Speaker 2: need higher cattle prices, not lower cattle prices. And the
• 7:40
  Speaker 2: ability to measure that this will be 25% below current
• 7:45
  Speaker 2: market price as well, that just doesn't exist, the ability
• 7:50
  Speaker 2: to do that. So, Andy, I think that the president
• 7:55
  Speaker 2: introduced this as a knee-jerk reaction. I don't think it works.
• 8:02
  Speaker 2: But what's going to happen is during that three-month period,
• 8:06
  Speaker 2: there will be an increase in of Brazilian beef because
• 8:11
  Speaker 2: they're the only ones that had the ability to respond
• 8:15
  Speaker 2: to this, Paraguay to a lesser extent. But our estimates
• 8:21
  Speaker 2: are that we'll probably see an additional 130,000 tons come
• 8:27
  Speaker 2: into America from Brazil over that three-month window. So that
• 8:33
  Speaker 2: has lowered imported prices. but not by 25%, nowhere near it.
• 8:40
  Speaker 2: And we've now seen those prices stabilise, and I'm expecting
• 8:46
  Speaker 2: that we'll start to see prices actually improve moving forward. So, Andy,
• 8:52
  Speaker 2: there is a concern. I think the worst is over.
• 8:56
  Speaker 2: I think that it's a short-term fix. I think there'll
• 9:01
  Speaker 2: be some pushback, particularly if the mid-term November elections Don't
• 9:07
  Speaker 2: go Donald Trump's way.
• 9:10
  Speaker 1: So where do you see the price of beef in
• 9:12
  Speaker 1: New Zealand going to?
• 9:15
  Speaker 2: Andy, I like where it's heading. And to be honest,
• 9:18
  Speaker 2: I see steer prices moving higher. So if we go
• 9:23
  Speaker 2: back to our forecast that we started our chat on,
• 9:29
  Speaker 2: I was at $ 9. 50 and my forecast had for the
• 9:34
  Speaker 2: middle of next year to go to $ 10. 50. Andy, I
• 9:38
  Speaker 2: think New Zealand will do that. So I see prices
• 9:42
  Speaker 2: peaking in May, June next year at about $ 10. 50 in
• 9:48
  Speaker 2: New Zealand. That, I think, will be the high over
• 9:53
  Speaker 2: the next few years. We start to pull back from there.
• 9:57
  Speaker 2: Nothing too dramatic. But, Andy... no, there's still, I think,
• 10:02
  Speaker 2: a little bit more upside to be had in this market.
• 10:06
  Speaker 1: Good on you, Simon. Thanks for your time. And interesting,
• 10:09
  Speaker 1: as always, you enjoy the afternoon over there.
• 10:12
  Speaker 2: Thanks, Andy. You too.
• 10:16
  Speaker 1: Simon Quilty of Global Agritrends. A good news story there too,
• 10:22
  Speaker 1: especially regarding beef. Going over $ 10. So we'll await and
• 10:26
  Speaker 1: see how this all pans out. Always good to catch
• 10:28
  Speaker 1: up with Simon. James Eggers up next. We'll get a
• 10:31
  Speaker 1: bit of reaction to this. You're listening to The Muster.