A challenging year but with positive developments, says MIA

MIA Annual Report 2013 - coverDespite a challenging year for the red meat sector, there has been progress in areas that will help the sector continue to be well placed to supply consumers around the world with high quality, safe products.

The past year has been a challenging one for the red meat sector, with unsatisfactory prices for farmers and unsatisfactory returns for processors, notes the Meat Industry Association (MIA) in its annual report for 2012-13.

However, as MIA chairman Bill Falconer points out in the report’s foreword, this is not the first time that the meat industry has faced difficult circumstances, and the sheep and beef industry has been characterised by volatility for decades.

This volatility can be put down to a range of factors: the weather; the timing of supply as well as production volumes; the mismatch in timing between farmers selling stock to processors and processors selling stock to retailers and consumers in diverse markets; security of supply as well as certainty of earnings; the need to earn returns from the whole carcase and not just speciality cuts; competition from cheaper protein such as pork and poultry; the changing marketing environment in both traditional and developing markets and New Zealand’s small scale as a producer in global terms.

“Much of the volatility we face is simply an inherent feature of the products we produce and sell,” Falconer notes in the foreword. “That said, the existing model, in which processors have little certainty of supply to overseas customers, not only results in a loss of value to the New Zealand end of the value chain, but exacerbates the volatility created by other factors.”

He points to the Red Meat Sector Strategy as a relevant reference point for any consideration of how the volatility of the sector can be reduced, while improving productivity and profitability.

“It was not intended to serve as a blueprint for reform of the sector, but rather to highlight those issues which are key to lifting sector performance: in-market co-operation, aligned procurement and best practice production, processing and marketing and the considerations which deliver best results.”

Processors need to work closer with farmers to implement solutions to the issues, he notes. However, dealing with short-term volatility requires a longer-term perspective in both procurement and marketing.

“It will take time to build confidence in the potential for this perspective to generate sustainable productivity. Over-capacity in the industry may have a distracting effect on stable procurement and supply, but it is only one of the underlying factors behind inconsistent profitability which needs to be addressed.”

Positive developments

Despite the challenges faced by the industry during the season, there were a number of positive initiatives that took place in the sector, the report notes.

These included the launch during the year of the Primary Growth Partnership programme by ANZCO, in addition to those already in place from Farm IQ and NZ Merino, and the Partnership for Profit programme initiated by Beef + Lamb Ltd with support from most of the major processors and the banking sector.

The MIA continued to coordinate a range of industry R&D projects in areas such as food safety and improving the quality and shelf-life of red meat, and there was good progress on a number of Ovine Automation Consortium projects during the year.

Health and safety was another area of focus during the year, and the MIA’s Health & Safety Forum – which brings together representatives from companies, government and the Meat Workers Union – developed new health and safety guidelines for the industry (more detail next edition).

There was also promising developments in a number of markets. An economic co-operation agreement was signed with Taiwan, under which tariffs on beef will be eliminated within two years, and on sheepmeat within four. Sheepmeat now has access to India, a market of enormous potential, though the tariffs remain high.

Also notable was the growth in exports to China, which has now become the industry’s largest market for sheepmeat by both volume and value, and a major market for beef.

However, these developments were not without their problems. The report discusses the detainment of more than 1,600 containers of meat at the Chinese border in May, and the increased level of administrative compliance required by China.

This is understandable given the concern by Chinese authorities to combat fraud and ensure food safety and traceability of food. But as the report points out,  it adds cost and establishing processes to meet these requirements has not been without its frustrations for exporters.

During the year, industry has also continued to have beef access substantially blocked to Indonesia, another country with which New Zealand has a free trade agreement (FTA), as a result of import quotas.

As Bill Falconer notes in the foreword, “What these issues show is that we have to work hard at gaining market access. Signing a Free Trade Agreement is not enough – ongoing work is needed to remove barriers and ensure that trade flows smoothly.”

The difficulties that the industry encountered in China during the year have emphasised the need to regularly evaluate resourcing to deal with changing trade patterns and to continue to develop relationships with key officials and decision makers in growing markets such as China, so that issues can ideally be avoided or addressed quickly if they do arise.

The MIA has therefore welcomed the news that MPI has now committed to increase resources to its market access team and to ensure that issues raised by industry are appropriately escalated and prioritised.

Copies of the MIA Annual Report 2012-2013 can be downloaded from the website www.mia.co.nz or email info@mia.co.nz.

 This article has appeared in Food NZ magazine (October/November 2013) and is reproduced here with permission.

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