A recent report by the European Commission’s agricultural directorate suggests it is time for New Zealand to develop new sheepmeat markets. This makes the dramatic increase in exports to China seem extremely timely, although the challenge will be to lift the average price which is roughly half that achieved for sales to the EU.
According to the report, economists predict that the amount of meat consumption will drop over the next 10 years, although posting a small increase on the 2013 level which was the lowest in a decade. The projection is for meat consumption in 2023 to be at a similar level to the amount consumed in 2011 because of higher prices and pressure on incomes.
Consumption and production of sheepmeat and beef are estimated to fall over the period with the beneficiaries being pork, the most popular meat, which will post a small increase of 2.8 percent and poultry which is forecast to increase at a rate of 1.5 percent annually.
Sheepmeat represents only 2.7 percent of total EU meat consumption which underlines its premium positioning. Therefore, it will never compete on price for consumption by the mass market.
Although this trend has been evident for many years, the New Zealand mindset has only more recently begun to move away from seeing sheepmeat as a volume product. This of course goes back to the days when this country was a high volume, low priced overseas farm for the UK. But the change really started in 1973 when Britain joined the Common Market and accelerated in 1985 with the removal of production volume based agricultural subsidies.
We have had the benefit of a sizeable sheepmeat quota into the EU, as distinct from Australia which was granted a large beef quota; but declining sheep numbers and alternative markets mean we no longer fill that quota. However the EU remains New Zealand’s most valuable global market because of the combination of volume, growing chilled shipments and prices obtained.
The European Commission report may not exactly be a warning about our vulnerability to a declining market, but it does indicate a need to plan for a future in which alternative markets for a premium product become increasingly important.
It also underscores the message that sheepmeat will never be a mass market product, but must be carefully marketed to the highest paying customers. It underlines the importance of flexibility which stems from maintaining a wide range of companies and individuals with networks and skills across the full set of product markets.
Any thought of mergers at the marketing end of the value chain should be resisted, as what appears logical in theory wouldn’t provide the best outcome in practice. In a world of premium products and niche markets, it is critical to maintain the ability to react quickly.