Brief Bites, 24th April

Alliance Farmer Shareholder News

In this edition:

Processing update
Global supply chain disruption continuing
Venison in China
Supporting the next generation of chefs
Know Your Co-operative applications close tomorrow
Global market update

Processing update

Our post-Easter production is focused on frozen key account programmes. Processing capacity is recovering across our plant network as people return to work after isolating or staying at home to look after family members due to COVID-19. However, there remains unavoidable processing delays as we work through the back-log of livestock, particularly for cattle.

We have as much capacity as we can turned on to process farmers’ livestock and we are running overtime wherever possible. We are also moving livestock across our network to process your animals as quickly as we can. We appreciate your support and patience during this challenging time.

Global supply chain disruption continuing

The global supply chain disruption remains a key challenge:

On the west coast of North America, there is a waiting time of more than 28 days at Long Beach port. Oakland port is now also difficult
Rotterdam in the Netherlands is substantially impacted by the Ukraine war, as sanctioned cargo previously bound for Russia and shipping to Ukraine has been diverted to Rotterdam and we are seeing flow-on impacts to other ports
In China, Omicron has impacted Dalian, Shanghai and Yingkou. Tianjin is becoming increasingly problematic.
As a result, vessel schedule reliability has been affected, there are wider transit delays and port and landside productivity challenges. We can expect this to continue with product ‘rolling’ from one vessel to another vessel, affecting the supply of our products to customers.

These issues have also resulted in the removal of a considerable volume of reefers and dry containers from the global supply chain.

This is important as we need to carefully balance livestock flow and processing volumes with our ability to ship products to our global markets and customers.

Venison in China

We are making pleasing progress with retail sales of our venison in China, alongside our partner Grand Farm.

Venison rolls and brisket cubes were added to the Grand Farm range on jd.com, China’s second largest e-commerce retailer at the end of December in a programme supported by Deer Industry New Zealand’s Market Innovation Fund.

The meat roll is a familiar format for Chinese consumers and used in traditional hot pot cuisine, where the rolls are dipped in boiling stock with other ingredients. It uses venison extracted from the flaps and brisket that is compacted and then sliced very thinly to a one-millimetre thickness. Seasonings are added during the processing for added flavour.

Another two packs, venison leg meat, which can be sliced and diced at home by the consumer, and leg cubes, were introduced to the range in the last month.

All four products are now available in two independent retailers’ stores in five cities – Harbin in Heilongjiang Province, Dalian in Liaoning Province, Nanning City in Guangxi Province, Luzhou in Sichuan and Sanya in Hainan.

We are also working with the Grand Farm team to identify new products that will resonate with Chinese consumers.

Supporting the next generation of chefs

Alliance is proud to be supporting the Pure South Famous Young Chefs Degustation lunch in Invercargill this weekend. Top chefs from across the country will be working with 30 students from Southland Boys High School and Southern Institute of Technology at the event, which aims to inspire and encourage young chefs from the region. The chefs will share their knowledge with 30 trainees and guide them to prepare the lunch for 120 guests. Southland has a shortage of chefs and the event is being organised by the local economic development agency Great South, Savour the South and the Southland branch of Hospitality New Zealand.

Know Your Co-operative

Applications for our third ‘Know Your Co-operative’ seminar have been extended and now close tomorrow (April 25).

The seminar in Christchurch on 24-26 May 2022 will give 12 shareholders the opportunity to gain a more in-depth understanding of Alliance Group and will appeal to those shareholders that may be looking to contribute to Alliance as a director in the future.

Alliance will cover the costs of the seminar including meals and accommodation. Successful applicants will fund their own travel.

Applicants must be shareholders either directly or by way of a beneficial interest in a shareholding entity and be platinum or gold suppliers. If more applications are received than we have places available, the Board’s People Committee will decide the successful applicants.

The application form can be found here.

If you have any questions, please email: communications@alliance.co.nz

Update from our global markets

Lamb

Inflationary pressure continues to build in all key markets, putting strain on consumer discretionary spend. Some consumers are trading down to cheaper proteins in the retail space and there is a noticeable drop-off in out-of-home dining. Inventories in the critical European Union, United Kingdom and North American markets are at elevated levels, which is creating further uncertainty. Growing volume out of Australia is putting pressure on prices in a number of key markets, namely Taiwan, Malaysia and the United States. Demand in the Middle East remains steady, with some price pressure now evident in Saudi Arabia.

Mutton

Mutton markets remain stable on the back of limited supply, however once production ramps up, we expect some negative price pressure in the key markets of the US, Taiwan and Malaysia. Additional volume out of Australia (similar to lamb) will also cause some negativity. China demand and price points will be pivotal to the mutton markets as we move into 2023.

Venison

All frozen stocks are now shipped with the production focus shifting to supply for the chilled Game Season. Demand for New Zealand chilled venison in Europe is firm but our ability to supply has been impacted by the uncertainty which remains around supply chains. On time delivery is critical for these programmes and importers are reluctant to extend arrival dates. This has resulted in a condensed production window, which ends for most in the third week of October.

Beef

The Chinese market continues to face challenges with supply chain, lockdowns and high inflation. Importers are struggling with ongoing lockdowns as COVID-19 outbreaks continue in Chinese cities. The lockdowns are more surgical and shorter but are still creating challenges as consumers rein in spending due to uncertainty. Prices are easing across wholesale markets.

The US market continues to slowly improve with slight price increases for grinding meat. Some importers have taken a more positive tone in the last few weeks and believe a slow recovery in the US market will eventuate. The grinding business is well positioned to benefit as consumers are trading down with minced beef sales improving as we move into Autumn. Chilled beef remains challenging with the US programme being impacted by food inflation and the slowing of the food service sector.

NZ and Australia continue to supply limited volumes at premiums over the South American suppliers (NZ @ 46% and Australia @ 23% of annual quota).

Asian market demand is showing signs of improvement with prices for fatty grinding meat lifting in the last few days. This has been driven by lower Australian processing volumes.

Co-products/Specialty Ingredients & Materials

Demand for offal from petfood for the coming season is strong with pricing improvements across the board. The tallow market remains strong and shows no sign of waning. Demand for casings remains with market pricing in Australia holding up.

Warm Regards

David Surveyor – Chief Executive

For more information about Alliance, visit alliance.co.nz

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