Comment: Positively potted red meat

Red Meat Sector Conference 2014Ali SpencerPositive messages, singing from the same hymn sheet, support from Government for the sector and even more use of the Māori language were all evident at Monday’s Red Meat Sector Conference, presenting a changing, more collaborative and, dare I say it, a happier face for the red meat industry. The following gives a potted account from my perspective.

The event attracted 290 delegates from across the sector and again saw representatives from meat processing and exporting companies, scientists, researchers, consultants, service companies, shippers, bankers, farmers, government officials, politicians –and even a potential customer – listening to the presentations and mingling at the events.

Fittingly, as it was held in Wellington, politics topped and tailed the event.

Opening the conference on the Sunday evening – and before the Hamburg Sud sponsored Welcome Cocktail Party at the Grand Hall, Parliament Buildings – was a multi-party political panel featuring the Honourable Nathan Guy (National), Honourable Damien O’Connor (Labour), Steffan Browning (Green) and Richard Prosser (New Zealand First). Facilitated by political pundit Colin James of the Hugo Group in a packed room, participants ranged across a series of topics but focused on a Fonterra-style solution for the industry’s woes and also water, in some cases displaying a less than satisfactory grasp of the issues facing the sector, according to various guests at the event.

On Monday, Colin James, managing director of the Hugo Group, offered his thoughts on the political scene heading towards the election: National vs Labour and Greens.. He thinks that a third term for the current government is likely, but if there is a change, it would be “quite a different government” with the Labour Party signalling its intention to be more active in the economy, which would not necessarily be welcomed by the meat industry.

The last political words were from the Minister of Primary Industries, Nathan Guy, who spoke after the Maersk Gala dinner. He had urged the continued sharing of ideas among sector participants, “including through the election of Meat Industry Excellence candidates to the Boards of the major cooperatives, (which) can only enhance understanding of the sector’s complexity. I encourage you to continue to engage and discuss any improvements of how the sector operates.”

He thanked the sector for all it does, “because I don’t believe you get thanked enough. Through hard toil and passion, you craft product that is exported to the finest restaurants and dinner tables around the world.”

He said Government has backed the primary sector and realises that it has “helped float our economy through stormy times when other economies have sunk. The primary sector has helped us pay for new schools, hospitals and roads.”

Singing from the same hymn sheet

On Monday, presenters were singing from the same hymn sheet talking of rising returns, more positive opportunities in the global marketplace for New Zealand’s sheepmeat and beef products, lessons learned from the maturing China market for New Zealand meat, the importance of enhancing the industry’s market access to both traditional and emerging markets and also of Government support for the sector.

In his opening comments, Meat Industry Association (MIA) chairman Bill Falconer reminded delegates that the 2010 Red Meat Sector Strategy (RMSS) was still alive and that the conference was designed to challenge and inspire and continue to drive its themes: coordinated in-market behaviour, aligned procurement and adoption of best practice.

Corner turned?

It was B+LNZ chief economist Andrew Burtt’s task to present results against the strategy. The corner certainly seems to have been turned for the industry – barring any more global shocks. He confirmed that for the 2013-2014 season export receipts for New Zealand red meat, co-products and wool amounted to $8.5 billion, up around $300 million on the previous year. Not a huge amount but with difficult global trading conditions in 2013, it is promising and certainly a start on the $3.2 billion industry is seeking towards 2025 – and, it could be noted, just one year is almost equivalent to the $326 million Government/industry total investment in red meat Primary Growth Partnerships.

Burtt pointed also to productivity improvements over the past 13 years and showed the importance of integrated farm operations to profitability.

“Following some challenging years, there are strong indications of improved results for many companies in the coming year,” commented Nathan Guy, in his speech at the Maersk Gala Dinner.

“The resilience is a reflection of the hard work of people throughout the sector.” He pointed to statistics for the June year end 2014, showing that the meat and wool sectors make up 21 percent of total primary sector export revenue – a record, he noted.

2014: positive year for meat industry

Looking forward, international meat industry analyst Richard Brown of Gira presented excellent and comprehensive data showing that there is now a “very positive” external environment for the global meat industry in general. This results in 2014 looking very positive for the New Zealand meat industry, influenced by factors including growing demand in China, a strong Middle East and North African (MENA) trade, “exceptional” US prices for chicken and pork and marketing pressures in the developed markets, especially the EU.

Britain’s economy is recovering, along with the US and there is moderated growth in merging countries, agreed Burtt.

This is all compared to 2013 “which was a year of great caution,” said Brown, though proved to be very much better for global meat processors than expected, he said.

Luke Chandler, Rabobank’s general manager of food and agribusiness research and advisory for Oceania, also outlined what he saw as the competitive challenges for the meat industry, echoing Brown’s view of the world. These include emerging market demand, market access and competitiveness between proteins. Chandler also believes the “supply chain is key.” Food and agriculture supply chains are under more pressure and becoming more complex, he explained, adding that he believed that New Zealand has a great brand and story.

Market access

Progress is being made with New Zealand’s bi-lateral free trade agreements with a number of countries. Work is targeted at gaining high quality agreements, which reduce the import tariffs for New Zealand sheepmeat and beef – which B+LNZ has calculated were accounted for $400 million in 2012, according to the Ministry of Primary Industries’ director-general Martyn Dunne – and also guard against non-tariff trade barriers, which restrict entry to New Zealand’s meat products.

An agreement with Chinese Taipei – Taiwan – was signed last year and there are on-going FTA negotiations with Korea and the Trans-Pacific Partnership (TPP), noted Andrew Burtt.

He also pointed to negotiations in their relatively early stages with the Gulf Co-operation Council, Russia/Belarus/Kazakhstan, the Regional Comprehensive Economic Partnership, India and, most recently, the EU.

Progress in the negotiations is slow, “but we’re in it for the long haul,” said Dunne.

He noted TPP offers a huge opportunity for New Zealand with five of our top 10 trading partners are also involved in the negotiations. The focus for negotiators continues to be on TPP, “delivering an ambitious, comprehensive and high quality agreement,” but MPI is also focused on ensuring meaningful progress on negotiations for sheepmeat and beef exports with India and other countries including Korea, he said.

Dealing with growing demand in China

China’s emergence as New Zealand’s number one market for sheepmeat and number two for beef was noted by several presenters, who also referred to lessons learned in working with the maturing market.

Mary Boyd, corporate network director for the Economist Intelligence Unit in China gave insights into the opportunities in China.

She talked about the social changes underway in the country, including  urbanisation and the rapid rise of online retailing, which consumers are taking to.

“Everybody is benefiting from the surge of red meat going in to China, through both front and back doors” said Brown.

According to both the Minister and Martyn Dunne, the New Zealand Government is providing extra support for the growing trade with China in the form of more personnel being placed both into the market and here in New Zealand and also a new $40 million embassy being built on the site of the existing New Zealand Embassy in Beijing.

“The recent progress in getting an additional 13 meat premises added to the list of premises approved for export to China is worth millions to the industry,” said the Minister.

He also noted that the recent MIA-led delegation to China “highlighted the determination of processors in the sector to work together and strengthen overall relationships here and overseas.”

MPI has also been prioritising the further work required with counterparts in China to review the meat access protocols to provide for access of New Zealand chilled meat, unprocessed casings – also known as ‘green runners’ – and further processed meat products, delegates were told.

Boosting returns

Two examples of ways people are seeking to boost returns for the sector were also presented.

Craig Ellison, an MPI portfolio leader and professional director who is deputy chair of NIWA and a Trustee of Poutama Trust among others, updated delegates on the latest developments for Tuhono Whenua, the Māori Red Meat Coalition. Results stemming from early work looking at measurement and research are encouraging, he said. “It’s early days, but there is appetite for change,” he noted, adding that the Coalition has received good engagement from processors. (Regular readers will remember Silver Fern Farms, for example, recently joined forces with the Federation of Māori Authorities and will become a major sponsor of the Federation’s annual conference and key primary sector fora.)

Lindy Nelson, the executive director of the Agri-Women’s Development Trust, talked about the importance of raising business skills among New Zealand farming women to assist in raising farm profitability. The trust is focusing on workshops and training courses to upskill women.

Water focus

Water use and management is an issue facing the sector. Dr Jan Wright, parliamentary commissioner for the environment, focused on the sector’s environmental responsibilities. Her presentation focused on her most recent report ‘Water quality in New Zealand: land use and nutrient pollution’, which looked at the two nutrient pollutants in New Zealand waterways nitrogen and phosphorus, which she described respectively as ‘elusive’ and ‘sticky’. From the pastoral industry’s perspective, nitrogen is the most important as it is sourced from animal urine which, in excess, finds its way into New Zealand’s waterways. With changing land-use towards dairy, the problem will become worse and finding ways to mitigate it will be key, she noted, though appreciated that improving water quality is a complex and challenging task.

MIA/B+LNZ sector-wide efforts commended

The MPI’s Martyn Dunne was speaking at his first Red Meat Sector Conference. He commended the MIA and B+LNZ’s efforts in bringing a sector-wide focus to the fore and talked of MPI’s commitment to supporting the red meat industry.

This includes making MPI services easier to access services for industry “customers”, efforts to enhance market access for New Zealand meat products around the world and government’s role in supporting activities through Primary Growth Partnerships and the Sustainable Farming Fund. He also talked of boosts in biosecurity and representation in and for the China market .

”The meat industry is a vital component of the economy,” he concluded.

Professor Shaun Hendy, from Auckland University and also author of the controversial book ‘Get off the Grass’, gave a thought-provoking look at the ‘Innovation EcoSystem’, networks of researchers and where the most innovation gets done.His research has mined data in the New Zealand and Australian patent database to establish a similar pattern for innovation in both countries showing that denser population areas produce more innovation.

He noted that video conferencing and other innovations have not eliminated the tyranny of distance. “It’s not good at finding people you don’t know,” he observed.

Hendy’s take home messages were that: “you’ve got to collaborate to innovate, collaboration requires trust and openness, diversity enhances novelty and diversity is managed through collaboration.”

Perspectives “hugely insightful”

“The perspectives on the industry were hugely insightful,” said Bill Falconer in his closing comments, adding that various of the presentations had underlined to him, “just how close we need to get to our customers in China.”

Conference presentations will be available at the Red Meat Sector website.

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