Big challenge ahead, resilience required

There is a big job ahead for the meat industry, with the effects of the worst drought in 70 years lingering and sheepmeat, in particular, under pressure. Resilience, innovation and integrity will be required to contribute to the MPI’s ‘Export Double’ challenge.

The Ministry of Primary Industries’ Situation and Outlook for Primary Industries 2013 (SOPI) report released today shows that it’s been a tough year for the sector as it deals with the most widespread drought since 1945-46, with over 47 percent of the country experiencing drought from January through to April this year and some areas still feeling its effects. Official drought status is unlikely to be lifted before its expiry at the end of September.

The drought is the worst for about seventy years, Minister for Primary Industries Nathan Guy said at the SOPI briefing. But it’s not a water shortage issue, it’s one of water storage. “Significant is the fact that New Zealand doesn’t capture and store enough water,” he said, adding that estimates show that with irrigation an additional 400,000 hectares of land could become productive, without a negative environmental impact. MPI has an ongoing programme of work on irrigation and water reforms.

MPI has calculated a $1.3 billion drop in primary export revenue to the year end June 2013 due to drought. The meat industry will continue to feel the effects of the Big Dry through to 2015 as breeding herds are rebuilt and the normal breeding cycle resumes and pastures recover.

Resilience will be key

Resilience will continue to be key – and the word was mentioned several times in the  briefing this morning – as livestock producers not only deal with the continuing effects of the drought, but also face competition for land-use from dairy, forestry and other sectors.

“Long-term trends in the meat and wool sector have shown producers to be resilient with farmers learning to adapt to demand and supply shocks beyond their control,” says SOPI.

The Minister is confident in the ability of farmers to pick up and use new technology. Even before the drought, lamb numbers were dropping and are forecast to continue a downward trend. However, he noted that even with fewer sheep, the same amount of meat is being produced now as it was in the 1980s. This is due to productivity improvements, improved technology transfer and impacts of the Primary Growth Partnership (PGP) programmes starting to become evident. The first three years of the programme are being celebrated later today.

Meat export value forecast to rise to $6.37 billion by 2017

The SOPI report shows that export values of meat, wool, hides and skins for the year ending June 2013 are estimated at $5.95 billion – a 17 percent fall on the $7.2 billion estimate for the end of June 2012 – with a forecast rise of seven percent to $6.37 billion in the year ending June 2017.

Lamb exports have been worst hit with a 16.4 percent droMeat and Wool Producer Prices 2001 to 2017p to $1.93 billion in the year ending June 2013, reflecting a 20 percent decline in export price and a 4.8 percent increase in export volume, SOPI notes. Exports are forecast to decline by over $250 million in 2013/2014 due to the drought this year, but then recover gradually over the outlook period.

Total beef export revenue is forecast to decline 3.3 percent to $1.94 billion, reflecting a 4.9 percent fall in price and a slight increase in volume. By 2017, beef export value is projected at $2.17 billion due to increased international prices and an assumed depreciation of the New Zealand dollar.

Venison’s export value for the June 2013 year-end is estimated to fall 11.7 percent to $181 million, mainly reflecting a 12 percent decline in export price. Decreasing export volumes over the outlook period result in a projected $172 million export value by 2017.

The exchange rate, with a very strong New Zealand dollar, has had an impact on New Zealand’s meat export returns over the past couple of years. However, MPI does expect some decline in the strength of the New Zealand dollar over the next few years, MPI director of sector policy Jarred Mair said. “Some of that change is happening now.”

The challenge: the Export Double

The figures above all show what will happen if the status quo is maintained.

Guy outlined the current size of the primary production sector which is currently worth $30 billion a year in export revenue. New Zealand’s primary exports are sent to over 200 countries around the world, feed an estimated 40 billion people and its production is based on the best food safety in the world, he said.

The Government’s Business Growth Agenda has placed a demand on the primary industry sector of doubling the amount earned to $60 billion by 2025, which MPI believes is “ambitious, but achievable.”

Clearly, leaving the ‘Export Double’ challenge to the status quo won’t work for the meat industry. This is where the PGPs, into which the meat industry and Government have invested over quarter of a billion dollars to date, the Sustainable Farming Fund which has assisted over 900 projects so far and targeting Māori agribusiness partnerships come in, the Minister explained.

“In addition, the key players are talking about reform [of the sheepmeat industry] and we are waiting to see what is happening there.”

Add to that, Government is continuing to invest in relationships with China, the Trans-Pacific Partnership and free trade agreements, particularly with India, Russia and Colombia, which will each contribute to lifting returns for this sector.

China, particularly, is a key driver for export growth, commented Mair, along with other emerging markets.He pointed to shifts in export destination for various meat products with, for example, the EU now taking 41 percent of New Zealand lamb export by value and 52 percent by volume in the year ended December 2012 and export volumes increasing to China, Hong Kong and the rest of the world.














Be the first to comment

Leave a Reply