It’s a scary thought how quickly things have changed, but China has become one of New Zealand’s biggest markets for red meat, almost without any warning, writes meat industry commentator Allan Barber.
After years of thinking of UK/Europe as our biggest market for sheepmeat and the USA for beef with all other countries way down the chart, China has surged to reach the status of our biggest destination by volume for sheepmeat with 60,000 tonnes in the last 12 months compared with 55,000 to the UK.
The rise in beef is less dramatic, although year on year volume increased by more than 600 percent to 27,500 tonnes. However, this volume is larger than exports to any single market other than the USA. The increases are less pronounced if measured in dollars, but the message is the same.
Having suggested that Fonterra and our dairy exports may be in danger of becoming too reliant on China, I am not about to decry the growth in sales of red meat to the same market. After all, we have been calling for diversification of exports from the traditional quota markets for ages and China offers a profitable alternative where New Zealand exporters can sell product without cutting each others throats.
It is still worth reflecting on the dangers associated with putting too much product into a new and fast changing market. China may not be such a risky market as it was 20 years ago, particularly now New Zealand has a free trade agreement, but the wool industry was badly affected by the extreme volatility in China purchases.
Meat exporters must ensure they choose their distribution partners wisely to avoid large inventory build ups which damage our reputation. As can be seen from the dairy experience, food safety is paramount and, while red meat doesn’t pose the same threats as infant milk formula, E.coli and BSE have every bit as much potential to ruin both reputation and consumer demand for red meat. It need not necessarily be meat of New Zealand origin that causes a health scare.
The growth in China’s middle class and average earnings, coupled with a growing taste for Western foods, suggests that demand for both beef and lamb will continue to explode. On the positive side of the ledger China will offer a profitable alternative to our traditional markets for many years to come.
But on the negative side, one more health scare could seriously damage the attractiveness of New Zealand’s food products. Longer-term China demand could adversely affect our capacity to supply other traditional markets. So it is important that we maintain a sense of balance in allocating our export volumes.
If we play it right, with a bit of luck, China may provide an impetus to New Zealand’s sheep and beef sector, encouraging farmers to see an incentive not to change to dairy and dairy support. Spreading the risk between both products and markets is the wisest strategy.