Are we paying too much for red meat?

Thursday, 11 February 2021

Complaining about the rising cost of red meat is as Kiwi as Red Band gumboots and L&P. But is our whinging valid?

To a point, yes, according to data from Stats NZ.

Over the last 10 years, average prices for several cuts have risen much faster than the rate of inflation as global demand for New Zealand beef and lamb sent farmgate prices soaring.

But rather than an across-the-board increase, the gap between “cheap” and “premium” cuts is closing.

A kilogram of beef blade steak, which cost $13.45 in January 2010, would have cost $15.84 in December 2020 if the price had risen at the same rate as inflation.

Over the last 10 years, average prices for several cuts of red meat have risen much faster than the rate of inflation.

However, instead of a 17.8 per cent increase, the price jumped about 57 per cent to $20.52/kg.

The cost of beef mince is on a similar trajectory, rising from $10.70/kg to $16.42/kg, almost $4 a kilo more than the estimated price adjusted for inflation.

Even the humble sausage has experienced a price hike – a kilogram cost $8.08 in 2010 but almost $11 last year.

Prices for premium cuts, however, are tracking much closer to inflation.

A kilogram of porterhouse or sirloin steak, which cost $25.26 in 2010, would have cost $29.75 if it had risen with inflation and came in just 1 cent shy of that at $29.74 a kilo in December.

Perhaps most surprisingly, the cost of a Sunday roast is not only lagging behind the rate of inflation, in the case of one cut, it has actually fallen.

A kilo of roasting lamb or hogget was $14.95 in 2010. Adjusted for inflation, the price would have been $17.61 in December but the actual price was $15.66 a kilo.

Roasting pork, which cost $11.21 a kilo in 2010, came in at $10.50 in December, significantly cheaper than the estimated $13.20 a kilo when the price is adjusted for inflation.

More than 90 per cent of New Zealand beef and lamb is exported and domestic prices generally follow those set overseas.

With more than 90 per cent of New Zealand beef and lamb exported, domestic prices generally follow those set overseas.

So, while New Zealanders in the UK love to grumble about lamb being cheaper in London, the difference is small.

Data from the UK’s Agriculture and Horticulture Development Board shows whole lamb legs sold across several UK supermarket chains averaged £7.79 a kilo (NZ$14.54) in December, when the same cut was just $1.12 a kilo more expensive in New Zealand.

Similarly, a kilo of sirloin steak was £15.97 a kilo (NZ$29.82) versus $29.74 a kilo in New Zealand.

But while the retail prices are relatively similar, the playing field remains uneven due to the dropping of farming subsidies in New Zealand in the 1980s.

Since then productivity has been the chief driver for Kiwi farmers while subsidies remain in effect in Europe, the US and many other countries.

Although the subsidies protect farmer incomes and make retail prices seem lower, consumers pay higher taxes to support them.

While still at record highs, red meat prices could be set for a change of direction, according to experts.

ASB economist Nat Keall said ongoing Covid-19 woes overseas and tentative signs the world is emerging from the global protein shortage of recent years were weighing on the sector.

Rabobank animal proteins and sustainability analyst Blake Holgate says prices for beef and sheepmeat are likely to fall in 2021.

Beef and lamb prices have been hit particularly hard by the pandemic given many cuts – particularly for lamb – are consumed in restaurants. Lockdowns have hit demand and limited the markup sellers can charge.

“Whilst the global vaccine roll-out is tentatively under way, restrictions crimping the food service sector remain in place in many parts of the world. Notably, parts of the UK recently went back into a third national lockdown,” Keall said.

The rebuilding of China’s pig herd, which had been hammered by African swine fever (ASF), is also likely to hit meat prices.

The global protein shortage triggered by the disease had supported high prices over recent years and partially offset the impact of Covid-19.

“At times, ASF has shrunk the Chinese pig herd by as much as 40 per cent, forcing consumers to substitute pork for other types of meat,” Keall said.

“For now prices remain historically high. However, the latest data shows the pig herd back at 90 per cent of normal levels as of the end of November 2020, suggesting things could start to ease a little as time goes on.”

Rabobank is also predicting reduced demand for New Zealand’s higher-value red meat cuts, as the international food service sector makes a slow and uneven recovery.

Animal proteins and sustainability analyst Blake Holgate said while the slump is set to pull farmgate prices for beef and sheepmeat back from the record highs seen in recent seasons, increased demand for burger meat should soften the blow.

Globally, 2021 should signal a return to animal protein production growth driven by the recovery of China’s pork production, Holgate said.

“African swine fever remains the biggest change driver in global animal protein, and in the year ahead we expect to see pork production grow faster than any other species, largely because of the recovery from ASF in China and Vietnam.”