US meat market is feeling the pinch of high inflation – Alliance

North American meat consumers are feeling the inflation crunch, but high-quality products exported by New Zealand have so far been insulated from the fallout, Alliance Group says.

Executives at Southland Meat Co-operative
– New Zealand’s largest sheep meat exporter – has just returned from a North American tour to assess demand for the protein category and consumer changes, following the pandemic.

Shane Kingston, general manager of sales, said lamb and beef are in demand across the foodservice and retail sectors.

Venison is becoming more and more present in retail with 11-pound packages of ground beef, proving to be an effective way to get consumers to experiment with protein, he says.

Plant protein is still around, but it has much less space and visibility in outlets and, in most cases, is subject to a significant price discount to increase sales.

“There is a strong sense of inflationary pressure starting to affect many major consumers in North America, with recent increases evident in ground beef sales versus cuts and shifts from some red meat proteins to white meats such as chicken,” he said.

“This, however, is not reflected in the higher net worth consumer market. Based on current prices, indications are that high-quality proteins are somewhat isolated,” he said.

Pet food as a broad category continues to grow, but combinations of beef, lamb and venison are a much smaller portion of the overall category, with fish, chicken, and turkey being the main core ingredients of dry pet food products.

China is the alliance’s largest export destination, but North America is important – accounting for about $400 million of its $1.8 billion in revenue.

In China itself, Kingston said Omicron’s version of Covid-19 had had a significant impact on logistics “on the ground side”.

There have also been port-side production issues in China, mostly in the major ports of Shanghai, Tianjin and Dalian.

Logistics has also been an issue in North American West Coast ports.

In Northern Europe, shipments bound for Russia were sanctioned and offloaded, resulting in a congestion at the ports in Rotterdam.

“In Europe, 15 to 20 percent of all refrigeration equipment is currently on sites — and not moving,” Kingston said.

“With China and North America and now northern Europe, this is a fairly major disruption to the supply chain.”

Amid all the turmoil, Kingston said there are some positive trends emerging in North America.

Throughout the pandemic, red meat protein has had an “upward trajectory”.

As more people stayed at home, they cooked more for themselves, and were ready to go to a higher level in their choices.

“Lamb was definitely part of that – there was a 30 percent increase in sales value from March 2020 to March 2022,” he said.

In terms of global trade patterns, more and more North American meat plants are now licensed to export pork and beef to China, with more South American producers exporting to the North American market.

There was a “relocation” of protein flows – tilted towards China.

With inflation in America at 8.5 percent, meat consumers are becoming more cost-conscious.

“While value holds up, volumes decrease. This is really due to the number of transactions that are flowing through them.”

Most Alliance products are exported to the United States through The Lamb Company – a joint venture between Anzco and Silver Fern Farms.

On the high end, Alliance is developing its product range to insulate itself from the effects of inflation.

The 2.2 to 2.5 kg lamb legs – usually bought for special family occasions – have been turned into small roasts.

In terms of Alliance operating costs, the Alliance has been feeling the impact of rising inflation – led by ocean freight costs.

“We’re in the middle of a very disruptive force right now, which is the supply chain — the ability to pass product.”

And while the situation at Chinese ports was “difficult” there, the lockdown in Shanghai was additionally significant.

“Once China is out of that, you’ll see a huge rebound back to where we were,” he said.