The world is hungry for meat, but will there be enough to fill the demand?
Fifty years ago, the average Chinese person consumed 4 kilograms of meat a year. In the present day, the average Chinese person now consumes 54 kilograms of meat over the same period. But that figure is half the average person in the US or Australia, who both on average will consume around 100 kilograms of meat a year. As their diet evolves however, the Chinese are showing signs of catching their Western compatriots at a rate of knots.
While traditionally pork has been the meat of choice for Chinese consumers, a spate of disease has started driving away consumers in droves, in a manner not dissimilar to the response to the Chinese baby formula controversies. Chinese pork producers have found their herds afflicted with African swine fever, reducing headcount numbers by almost 25%.
As with the response to the baby formula scandal, Chinese consumers have sought to replace their domestic products with trusted international sources, and once again it is Australian producers who stand to benefit. Sales of Australian beef to China, for example, have surged by 66% in 2019, and the producers of other meats are looking to benefit equally as much.
“African swine fever will be the biggest influence on global meat markets possibly for the next few years, if not possibly the decade,” Tim Ryan, a Singapore-based market analyst with trade group Meat & Livestock Australia, said. “I don’t think there’s going to be enough meat around the world available to actually fill the gap.”
This isn’t a small gap to be filled, either. China is already the world’s top destination for mutton & lamb, proving that the country already has a very healthy appetite for the meat. Australian and New Zealand farmers export 70% of the global supply of lamb, but it is an industry that is under increasing pressure owing to ongoing drought conditions being experienced across the nation. This is creating price pressures on lamb, which for the savvy farmer or investor with a long-term outlook, could prove to be an opportunity to fulfill the significant impending gap in supply.
The tight supply of sheep meat is good news for producers and investors alike as it could be expected that prices rise. Australian Food and Farming is one Australian company primed to benefit from the global demand and a local supply squeeze.
By the end of next year, AFF will operate a breeding flock of 20,000 head and as they build scale through natural growth and purchases, they are well positioned to benefit from this trend. As a pure-play meat sheep producer, their focus is solely on providing direct exposure to this theme and the growth that it is experiencing.
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** Reach Markets have been engaged by AFF to assist with private investor management.
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