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Alliance expects African swine fever to support meat prices

Thursday 2nd May 2019

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Red meat cooperative Alliance Group said meat prices are strong as the African swine fever outbreak decimates Chinese pork production.

Chief executive David Surveyor says meat prices are "generally quite solid at the moment" due to the disease which is having a massive impact on pig protein prices in China. That is, in turn, increasing the value of other meat proteins, both beef and lamb. 

"Because of the size of the China market, we see that having some roll-on ramifications for prices across the globe," he said. 

A Rabobank report in April said production losses from African swine fever have "eclipsed initial estimates." In 2019, it expects Chinese pork production losses of 25 percent to 35 percent in response.

"The expected 30 percent loss in pork production is nearly 30 percent larger than annual US pork production and equivalent to Europe’s annual pork supply," it said. 

It noted the disease has spread to Vietnam, where it expects production losses to exceed 10 percent and "ASF has also entered Cambodia and could move further into Southeast Asia, with more production losses to follow." 

Rabobank expects available global protein supplies to be redirected to China in an effort to satisfy the growing protein deficit. This unprecedented shift in trade will likely create unexpected product shortfalls in markets previously served by these suppliers, creating short-term market volatility that will ultimately result in higher global protein prices. 

Lower Chinese pork consumption will also support increased demand for poultry, beef, seafood, and alternative proteins that will shape global production trends, it added. 

Relative to the year to Sept. 30, when Alliance reported a net profit of $6.6 million, from $14.4 million a year earlier, Surveyor said the company is "actually in pretty reasonable shape for this stage of the year." 

One key reason for that is its new petfood joint venture with Scales Corp. In March, Scales Corp said Alliance would pay $15 million for a 50 percent interest in its Meateor business and operations.

Meateor Foods processes and markets meat and other ingredients from New Zealand and Australia to the pet food industry worldwide. More than 19,000 tonnes are exported each year, according to Scales.

Surveyor said Alliance distributed $5.7 million in loyalty payments to some of its suppliers for the March quarter.

The weather had impacted the start of this season but the value of the payout was similar, he noted.

"So it's actually quite positive in my mind we have paid out roughly the same amount as last year." Alliance last year paid $5.9 million in the same period, according to its website. 

The loyalty payments are made to so-called platinum and gold shareholders who supply 100 percent of their stock to the company. They are paid an additional 10 cents per kilogram for each lamb, 6 cents/kg for a sheep, 8.5 cents/kg for cattle and 10 cents/kg for deer.


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