Brief Bites, 27 February

In this edition:

• Omicron update including pricing impacts, processing guidelines and wait times, and
a link to our shareholder webinar
• Alliance launches new venison range in China
• Global market update

Omicron update

New Zealand is now in a critical stage of the Omicron outbreak with the number of cases rising
exponentially across the country. Over the coming months, we will all know family, friends and
people in our community who have tested positive for COVID- 19.

This is unchartered territory for New Zealand, and the situation is also incredibly fluid and
difficult to plan for with events changing daily. As always, we are doing everything we can to
mitigate the impact of COVID-19 on our processing network so we can continue to process your
livestock. We are planning for a range of scenarios, given the rapidly changing environment.

As a farmer-owned co-operative, we have set four commitments for the next phase of response and
recovery:
• Ensuring the health, safety and wellbeing of our people

• Minimising the impact on processing capacity

• Being open and transparent with our farmers, suppliers and customers

• Maintaining our agile approach by exploring unlocking new channels, shifting between
open markets, changing product forms and managing costs and capital expenditure

Processing capacity

We are managing daily the impacts on our plants, and whilst we have managed to minimise impact on
our processing capacity to date, we can expect some disruption over the coming weeks.
The sharp increase in the number of cases throughout New Zealand is starting to have an effect on
our people, their families, and rural communities they live in.

Across our network, we are seeing rising levels of absenteeism as some of our people isolate or are
required to stay at home to look after children because schools have closed. For example, a widespread community outbreak in Dannevirke saw our plant impacted by absenteeism during the week, despite there being no cases on site. Our Levin and Nelson plants have also been impacted by absenteeism.

We have been planning for this and implementing a range of initiatives to lessen the impact of the situation, including consolidating day and night shifts where necessary to allow us to continue processing. For instance, this week we will be consolidating bovine to one shift at Levin due to a community outbreak.

We will also move livestock across our network to process our farmers’ livestock as quickly as
possible.

We have been using Rapid Antigen Tests (RATs) for some time, and in line with our earlier stated
commitments, we are continuing to increase the frequency and spread of RAT testing across our
business based on risk. While this brings additional cost and time, we think it’s the lowest risk
approach at this stage of the outbreak.

Alliance is also supportive of an industry-based approach to RAT testing, as we have seen this work
well with the alert level operating protocols throughout the COVID response. Having a cohesive and
consistent approach across the industry has served New Zealand and New Zealand farmers well to
date.

We have been in regular contact with the Ministry for Primary Industries and they are supportive of
our efforts to continue operating the plants at increased safety levels to ensure we manage for
COVID-19, support the preservation of jobs and meet the needs of our farmers.

Pricing

As a responsible co-operative, we need to ensure our livestock prices reflect the costs of
processing, supply chain conditions and the demand for our products in our global markets. In this
respect, pricing across species remains solid.

The current situation with Omicron sees us sacrificing some value as we are not able to process the
optimal product mix while managing increased levels of absenteeism. The priority rightly is getting
your animals processed when you need them off the farm.

While we are benefiting from a favourable USD-NZD exchange rate and strong demand for our products,
the supply chain continues to be impacted by container shortages, off schedule vessels, delayed
transit times, and port productivity. Last month, only three out of 10 vessels were on schedule.
We are monitoring our global markets daily and making decisions on optimal product mix to preserve
long-term access to all markets. This means, at some plants, we are currently diverting some
products from China to other markets. This will reduce the value we can capture for most of our
products. As a result, we have reduced livestock prices for lamb, sheep and cattle this week.

We have made this difficult decision in order to strike the right balance between maintaining a
sustainable co-operative and returning as much value back to farmers as the current operating
conditions allow. If we have been too aggressive, this money will be returned to farmers.

Processing guidelines reminder

As a guide, we will be managing our processing capacity on the following basis:

• Priority processing for platinum, gold shareholders and then other shareholders

• We will not be taking non-shareholder supply while capacity is under pressure. We
will also monitor ‘queue jumping’ and take action if required

• Animal welfare issues will be considered

• Access based on forecasts

We have established livestock booking allocation forecast plans for our platinum and gold
shareholders supplying lambs and cattle. These booking allocation forecast plans are available
through your Alliance livestock representative. Like any plans, they will need to be reviewed and changed, as Omicron unfolds. For example, if capacity is meaningfully impacted, then booking allocations will be reduced across all suppliers in
an effort to be equitable to shareholders.

Processing waiting times

Average waiting times will vary depending on plant, region and livestock mix requirements, so the
following times are intended as a guide. Waiting times could change due to weather conditions,
labour availability, the need to balance livestock inflows with global supply chain challenges and
seasonal processing requirements.

Given the level of uncertainty, it’s a good idea to have plans in place in the event you need to
hold livestock for longer. You should also consider different scenarios if you are unable to look after your animals, staff or
business. Beef + Lamb New Zealand and other primary sector groups have developed this plan. Please
also refer to this useful guidance.

• North Island as of 27 February, Two weeks for lamb and ewes, Three-four weeks for cattle
• South Island as of 27 February, One-two weeks for lambs and ewes, Two-three weeks for cattle
• Two-three weeks for deer

The above wait times are averages and a guide only. Please keep in regular contact with your
Alliance livestock representative to ensure planning information is up to date and changes in
circumstances are well communicated.

Shareholder webinar
For more on what we are doing to ensure we can continue to pick up and process livestock and
protect our plants, plus an update on our premium portfolio growth and diversification of global
markets, click here to view one of five shareholder webinars hosted by the Livestock team over the
last fortnight.

Venison programme

We are launching a range of new venison products in China. Two of nine new products, venison hot
pot rolls and venison brisket cubes in premium packaging, were launched in December and the
investment will help accelerate this programme. The promotional focus will be on Chinese festivals,
such as New Year, Spring Festival and Golden Week, and will help drive the rate of sales in new
outlets.

Update from our global markets

Lamb
Post-Easter production is now focused on frozen key account programmes. In-market inventory is low,
particularly in the European Union, as the food service sector continues to improve with the
majority of COVID- 19 restrictions now lifted.
United Kingdom retail is steady with some improvement in food service with all country restrictions
about to be lifted, which will assist this sector. In North America, retail and food service
remains steady but inflation is a concern with some consumers now trading down to lower proteins
such as poultry and ground beef.
Consumption in China is now on a seasonal slowdown as the warmer months approach, however
processors will begin to build stocks for the colder months later in the year. Demand in the Middle
East is now firm as market inventory remains low. Supply chain issues remain ongoing.

Mutton
China continues to underpin this business with diversification continuing into Malaysia, Taiwan, UK
and North America. The product range for these markets is a combination of commodity and further
processed cuts.

Venison
Frozen negotiations are now being concluded to key European customers at improved levels to 2021.
The situation in Europe has improved as a direct result of our strategic intent to diversify from
established EU markets into developing markets such as China and North America. Niche opportunities
for the UK are appearing in the home delivery category, which is in the development stage but looks promising.

Beef
There are no changes in the Chinese market with stable trade within a narrow price range on the
wholesale market and demand remaining firm. We haven’t seen any improvement in supply chain issues
with continued challenges in clearing containers. For example, some small ports are implementing
“Imported Cold-Chain Supervision Warehouses”. This is a centralised government-run warehouse to
disinfect/nucleic acid test imported frozen goods – taking business away from traditional clearance
warehouses and slowing down clearances. The beef cut market is very firm with bones having slightly
declined as the demand for hot pot is expected to slow down.

The US market is also unchanged, with strong pricing reflecting the lower volumes of both domestic
and imported beef. The West Coast of the US continues to offer a small premium (1-2 cents) across
most items as shipping issues limit supply. We are well positioned with the approaching cow season
with some early positions confirmed at strong pricing. Asian markets are firm with sales mainly
focused on tables cuts and grinding meat.

Specialty Ingredients & Materials
Demand for co-products remains steady however the shipping of dry containers remains challenging.
The South Island Strong Wool Indicator was +6c in the latest sale.

Warm Regards
David Surveyor – Chief Executive