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Demand drivers changing within the global protein matrix

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article image Bill Cordingley

New York-based head of Rabobank’s Food and Agribusiness Research division Bill Cordingley says that demand drivers are changing within the global protein matrix, with the needs of developing markets taking precedence.

Mr Cordingley will address graziers, processors and industry stakeholders from south-eastern Australia at presentations taking place this week in Sydney and the Coonawarra region of South Australia.

Speaking of a shift taking place on the global protein stage with traditional, developed markets facing the challenge of stagnating or slow-growing economies, declining household real incomes, and stalling top-line volume growth, Mr Cordingley says the situation is exacerbated by the strong developing market demand for animal proteins increasing the cost and volatility of commodity inputs globally, making meat more expensive for western consumers.

Developing markets on the other hand, hold the future for protein consumption growth based on a strongly-growing population and income growth, with a large group of consumers moving into the sweet spot for diet change, and accelerating demand growth for animal protein in the diet.

Cultural drivers play a huge role, including how meat is traditionally produced and delivered, through wet markets or more modern retail, cooking preferences and religious preferences. For instance, Mr Cordingley says there is limited opportunity for pork in Indonesia and other Muslim countries while beef is not preferred in India.

Poultry is the most efficient and low-cost animal protein alternative besides seafood and generally is less impacted by cultural challenges. He expects poultry to be the number one consumed meat in the world by 2020. While developing demand growth is driving volume growth for meat consumption, it’s also driving volatility in margins for producers and processors who are trying to tackle the new opportunity.

In addition to higher feed costs, weakening consumers in the west looking to trade down are also chasing cheaper protein alternatives, creating a strong drive to produce more efficient animal protein. As a result, feed costs are pushing prices up for traditionally cheaper items such as poultry, pork or ground beef with increasing demand.

Australian protein producers keen to capitalise on the emerging market demand growth opportunities need to take a proactive export market development approach. Mr Cordingley advises that persistent upgrading of the brand, demonstrating reliability in international markets, excellent food safety and partnerships along the supply chain are all key elements that will help Australia leverage the opportunities in the emerging protein market.

Mr Cordingley is part of Rabobank’s Food & Agribusiness Research and Advisory division (FAR) where he is responsible for analysing the beef and protein sectors. He is connected to the agricultural industry at a deep level, having been raised in south eastern Australia where his family operated a mixed cropping and livestock enterprise and a meat processing business.

Rabobank animal proteins analyst Matt Costello, who is also touring with Mr Cordingley this week, is responsible for analysing trends and market developments within the animal proteins sectors, predominantly in Australia and New Zealand.

Giving his views on the sheepmeat industry, Mr Costello says there has been a lift in prices in Australia, as supply has been tightening over the year. Though supply has been consistent in recent months, it is offset by the strong demand boosting returns for producers in both Australia and New Zealand. Sheepmeat prices are expected to hold firm for the remainder of 2014. 

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