Frozen beef leads rise in export value for meat

Frozen New Zealand beef led an increase in export value for meat and edible offal in July 2012, compared with July 2011, according to Statistics New Zealand (SNZ).

The latest figures show export value for meat and edible offal grew by $25 million (6.9 percent) during the period led by frozen beef, which increased by $22 million. Exports of beef to the US increased by $19 million, leading a $35 million (11 percent) growth in overall exports to that market. This corresponded to a $19 million fall in the value of beef exports to Indonesia.

Meat and edible offal is still trending upwards in value since its recent low point of February 2012, but is still 11 percent lower than its record high point in July 2011, according to SNZ.

Overall, the value of exported goods rose $296 million (eight percent) in July 2012 to $4 billion, compared with July 2011. This was led by a rise in the value of milk powder exports, says SNZ.

Imports rose $383 Million (11 percent) to $4 billion, with all three broad economic categories – capital, intermediate and consumption goods – rising in value.

The trade balance for July 2012 was a small surplus of $15 million (0.4 percent of exports). This compares with a surplus of $103 million (2.8 percent) of exports in July 2011.

Seasonally adjusted exports fell 0.4 percent and imports fell 1.5 percent compared with June 2012. Most major export commodities fell, offset by milk powder, butter and cheese, which rose 20 percent, reports SNZ.

I’ll just print me a steak …

Traditional meat exporters will need to consider future protein competition coming from outside the box in the future, as new technology is attracting innovation funding around the world.

One such piece of research, by a US company called Modern Meadow, has this week gained between US$250,000-300,000 for a tissue engineering project. Modern Meadow is said to be developing a fundamentally new approach to meat and leather production, “which is based on the latest advances in tissue engineering and causes no harm to animals.”

The news was announced by the US-based Thiel Foundation, set up by one of the founders of PayPal Peter Thiel. It was one of three new grants, awarded through its Breakout Labs programme. This is a revolutionary revolving fund to promote innovation in science and technology. The two other grants went to medical and therapeutic innovations.

According to Breakout, Modern Meadow co-founders Gabor and Andras Forgas respectively invented and helped to commercialise bio-printing, a technology that builds tissues and organ structures based on the computer-controlled delivery of cells in three dimensions. The two previously co-founded Oganovo,a a San Diego-based regenerative medicine company which applies bio-printing to a range of medical applications including drug discovery, drug testing and ultimately transplant tissues. They plan to use the Breakout Labs funding to apply the latest advances in tissue engineering beyond medicine to produce novel consumer biomaterials, including an edible cultured meat prototype that can provide a humane and sustainable source of animal protein to consumers around the world.

“Breakout Labs is a much-needed source of funding and support for emerging technologies like ours,” says Andras Forgacs. “Investors across the board have become more risk-averse and yet early funding is critical to enable truly innovative ideas.”

Modern Meadow, based in Missouri, is combining regenerative medicine with 3D printing to imagine an economic and compassionate solution to a global problem, says Lindy Fisbhurne, Breakout Labs’ executive director. “We hope our support will help propel them through the early stage of their development so they can turn their inspired vision to reality.”

Launched in November 2011, Breakout Labs provides teams of researchers in early-stage companies with the means to pursue their most radical goals in science and technology. To date, the fund has awarded a total of nine grants, of up to $350,000 each. Breakout Labs accepts and funds proposals on a rolling basis.

Although very early days as yet, the concept supported by the fund could bring printing your own steak for the barbie nearer to reality, but just don’t expect it in the near future.

The Modern Meadow innovation is not alone in attempting to solve the world’s future protein needs. New Zealand’s Riddet Institute is also working on the joint PROTEOS project with its counterpart Wageningen University in The Netherlands, “formulating novel solutions that involve extending and using more effectively future animal-based protein sources, transforming the protein supply chain” – essentially growing meat in the laboratory. Project plans involving staff from both organisations will be finalised this year.

 

 

 

Building Export Markets, government releases progress report

The Government has today unveiled its first Business Growth Agenda Progress report on actions to boost New Zealand exports. It is a timely appearance as the Primary Sector Boot Camp reaches its halfway point in the US.

Launched by Finance Minister Bill English and Economic Development Minister Steven Joyce, the Building Export Markets report from the Ministry of Business, Innovation and Employment (MBIE) confirms the Government’s target to increase the contribution of exports to the economy from 30 percent to 40 percent of GDP by 2025.

English says this a challenging target and achieving it will require a concerted effort by New Zealand over many years. It will also require the continued development of new and expanding export markets.

“It is only through exporting that New Zealand, with a small domestic market, can deliver the growth and productivity required to enhance the wealth of our country and create more and higher paying jobs,” he says.

“Committing to this ambitious goal means the Government will stay focused on supporting firms to grow their exports.”

Steven Joyce says the report highlights the significant shift in economic power from the West to the East that is expected to happen over the next 20 years.

Building Export Markets is the first of six progress reports on the government’s Business Growth Agenda. Others will address innovation,skills, capital markets, infrastructure and resources. The reports lay out the work programme government agencies are implementing. Each has an informal portfolio group of ministers specifically grouped around the work streams, to drive the Business Growth Agenda forward and focus on what matters to business and companies.

Government intends to see three additional cross-cutting themes to be reflected across the Business Growth Agenda workstreams. These are: Maori Economic Development, Greening Growth; and Regulation. Better telling the ‘New Zealand Story’ is another Government priority and work is already underway with key stakeholders on “developing a compelling and consistent narrative about our country’s special qualities that work for a range of exporters and sectors,” according to the Ministers.

Actions contained in the Building Exports report include improving access to international markets, making it easier to trade from new Zealand, helping businesses internationalise, increasing value from tourism and high-tech manufacturing, growing international education and strengthening high-value manufacturing (including food and beverage manufacturing) and services exports.

“This first report is important, as it lays out the challenge for achieving growth – which is about being much more closely linked into the rest of the world and taking advantage of our opportunities,” says Joyce.

“While the world is going through tough times, the growth in Asian incomes will occur over the next 20 year. So there will be job growth, New Zealand’s challenge is to ensure it occurs in New Zealand, not in Australia, or somewhere else.”

The report shows that beef, lamb and wool accounted for 13 percent of New Zealand’s total $47.7 billion goods exports in 2011.

The Building Export Markets report is available here.

Carter in US for boot camp

Because of its size and importance, New Zealand’s primary sector, which currently accounts for 55 percent of exports is “critical” to achieving the government’s desired growth, the report says, so the outcome of this week’s Primary Sector Boot Camp at Stanford University will also be critical.

Minister of Primary Industries, David Carter, is part of the nine-strong Export Markets ministerial group, which also includes Prime Minister John Key, Steven Joyce, Murray McCully and Tim Groser.  Carter is travelling in the United States this week to attend the Boot Camp and also to talk with US agriculture sector political leaders and officials.

“This is an excellent opportunity for the leaders of some of our most forward-thinking primary sector companies to collaborate on formulating a plan to leverage New Zealand’s competitive advantage globally,” Carter said before he left.

“It’s not often that we can get a powerful group like this representing over 80 percent of New Zealand primary sector exports around the table, and I am confident of a positive outcome.”

About 20 leaders from New Zealand’s dairy, meat, seafood, wine and horticulture industries are among those attending the week-long camp alongside top government representatives from MPI and NZ Trade and Enterprise. The group will be hearing from first class speakers to inspire and motivate their thinking. The event has been supported with a $100,000 grant from AGMARDT.

Among the range of agricultural organisations the Minister is meeting with separately to discuss common New Zealand–US primary industry interests are the Tri-Lamb Group and US Cattlemen’s Association.

“These meetings further strengthen the New Zealand-US bilateral relationship and give our two countries the opportunity to canvass a range of issues in the primary industries policy area.  It is an opportunity to highlight the excellent collaborative work we already have with the US though the Global Research Alliance on agricultural greenhouse gases,” says the Minister.

“I particularly look forward to discussions on the mutual benefits that will be realised through the Trans-Pacific Partnership free trade agreement currently under negotiation.

“The TPP is important to New Zealand’s trade future and this visit will provide the opportunity to take political level readings on its progress.”

Food’s changing world and demands

Hyperglobalisation, China, mega cities, urbanisation and water are some of the big issues that will play their part in the future of the New Zealand and global export meat industry, according to several Red Meat Sector Conference speakers.

In his presentation about the political and economic environment facing the industry, Colin James of the Hugo Group said it is becoming more and more difficult for a nation to act independently these days. ‘Hyperglobalisation’ refers to the increasing global interdependence and interconnectedness, which make protection from global economic forces more difficult, he said.

We can expect more of the same over the next 20 to 25 years, he explained. “It’s going to need a fair amount of resilience.”

Water, along with fossil fuels, will be the big issues, he predicts. Multinationals are rebranding and adopting a “fresh, clean, natural” stance rather than ‘clean, green’ approach to capitalise on the emergence of an affluent middle class in emerging markets. This growing middle class around the globe is calculated to encompass more than 210 million new households with income of US$20,000 or more by 2025, which he believes New Zealand is well placed to serve.

Four percent global GDP growth predicted

New Zealand’s top ten trading partners are projected to grow roughly four percent a year in 2012 as weighted by the goods trade. “Modest, but not boom time,” James commented.

Four percent in global GDP growth also stood out for Richard Brown of market research company GIRA, who admitted to being surprised that the forecasts were so positive. The leader is China, whose GDP is anticipated to grow in 2011/2012 by 8.5 percent, “not as good as expected but still OK”, followed by Indonesia (6.5 percent). He anticipates similar growth in 2012.

In his detailed look at the outlook for various meats, including beef and sheepmeat, he said that global prices for meat are generally, “fundamentally more exciting than they have been.” He was reassured with the direction of the trends, which he said were, “very good news for the producing sector.”

In 2011, prices had gone up boosting producer morale, because total global meat production was down – largely as a result of the outbreak of the pig disease PRRS in China, Brown explained. “What that illustrates is the Chinese effect on global trade is profound.”

This point was echoed in a later presentation from McDonald’s senior director and head of strategy for China and Hong Kong Arron Hoyle, who said that China is having a dramatic effect on global commodities.

“We don’t sell beef at McDonald’s, we sell a burger, so other commodities have to be taken into account.”

Rise of the dragon

Both James and Brown pointed to the current difficulties in the US and in Europe, which is facing big problems with the Euro. Europe had a “spectacularly fragmented meat industry,” Brown said and pointed to problems with the region’s biggest meat company, Vion, which is now in trouble after a period of rapid acquisition. This reflects a lower rate for now for global corporate processor consolidation “with a long way to go and an unproven success record.”

Arron Hoyle also pointed in his presentation to the ‘rise of the dragon’, the lean away from the west to the East, with McDonald’s choosing to target consumers in what it calls the APMEA (the Asia Pacific, Middle East and East Asian) region.

Unprecedented urbanisation

Hoyle talked about urbanisation in those emerging markets, such as China and India, “like we’ve never seen it before.” In the APMEA countries populations are moving from rural to urban settings in a similar manner to Britain’s Industrial Revolution, “but it’s happening 20 times faster and involves about 800 times more people,” he explained.

“We’re living in an era where we’re seeing different dynamics to the previous 50 years,” he said, adding that volatility will be more extreme than ever before.

‘Mega Cities’, those with populations of more than 10 million, are on the rise and currently count Shanghai, Mexico City, Sau Paolo, Beijing, Mumbai and Delhi as the top six.

“In addition, emerging market cities will be a key driver of global food demand with key 440 cities identified across Asia. With this explosion in urbanisation we see many ‘tier two cities’ with populations over one million evolve: By 2020 it is projected China will have 221, India 50, Indonesia 15 and Korea nine.”

With this trend comes a “massive” transport and infrastructure need, but also a forecast quadrupling of per capita of GDP by 2020, said Hoyle.

“It’s a world of opportunity for years to come,” he said cautioning that it also comes with higher rents and increased pressure on costs for McDonald’s stores or other businesses that target Asia as a key future growth driver.

This article appeared in Food NZ magazine (August/September 2012).

 

Be smart: keeping consumers happy

Keeping its consumers happy and listening to what they want has significantly improved McDonald’s business performance including financial returns, according to one of the company’s top China-based executives.

Introduced as a “good friend of New Zealand beef” at the Red Meat Sector Conference, Arron Hoyle, McDonald’s senior director and head of strategy for China and Hong Kong and a major customer for New Zealand’s lean manufacturing beef, said that the result deserved “a massive thank you to the New Zealand meat industry.”

McDonald’s had selected New Zealand and Australia as its sources of beef for the region because of the two countries’ reputations for food safety. While the US is still the largest market for the company, the company is significantly growing its presence in the APMEA countries.

In 1990, McDonald’s entered China, the fastest growing market in the world, when it opened its first store in Beijing. In 2010, it had 1,000 stores open and by 2013 will have 2,000.

All new stores will have a uniquely McDonald’s style, reflecting Chinese expectations for a modern, trendy image.

“We found that we need to ensure consistency in supply of style and expectations.”

There is no silver bullet, he went on to say. “You have to work extremely hard and to understand your consumer better than your husband or wife.”

He believes that New Zealand is well positioned to grow in Asia, particularly in China with its need to “import virtual water” due to ever growing water constraints as the country develops.

The Chinese market changes rapidly depending on the supply/demand dynamic. McDonald’s is forecasting beef growth to 7-8 million tonnes a year by 2020 and McDonald’s China demand alone to surpass 60,000 metric tonnes per annum.

McDonald’s likes to think it’s a great partner for NZ, says Hoyle, “the industry and all suppliers we partner with, we really like New Zealand beef. We don’t manage the supplier, we manage the business together in a partnership with suppliers.”

For the New Zealand beef team, it’s going to be a case of being better at the value chain, to execute against the opportunity, measure effectiveness versus efficiency and being faster than the competition to solutions.

“The data is showing us the opportunity is behind the hill. We need to work together to get there,” he said.

This article appeared in Food NZ magazine (August/September 2012).

Meat price outlook is positive in spite of short-term wobbles

The exchange rate and uncertainty in the Eurozone remain the biggest negatives for red meat exports in the short-term, but industry commentator Allan Barber believes the outlook is sill positive heading into next year.

“It’s very hard to pick what will happen in Europe, which will inevitably have a large impact on lamb prices for the foreseeable future,” he says. “Southern Europe and the UK are technically in recession and are unlikely to improve much, at least until the European Central Bank (ECB) manages to sort out how it will cope with the trials of Greece, Spain and others.

“But the longer term prospects for lamb are still favourable, once inventories from the season just completed have moved through the trade.” Read more ….

Call to arms for agri-food

A proposal for a new Agri-Food Board is centre of a comprehensive new strategy aimed at tripling the value of exports for the agri-food sector to about $60 billion.

The Riddet Institute, a national centre of research excellence focusing on food, digestive physiology and nutrition, issued a ‘Call to Arms’ yesterday through the launch of its independent report on the future of New Zealand’s agri-food sector. The report calls for a joint approach from industry and government to drive the activities needed to treble the value of exports in the sector by 2025, as suggested in the Government’s Economic Growth Agenda in 2009.

The report contains options on how sector leaders can work together and why the agri-food industry should lead the strategy implementation work.

It was commissioned by the Riddet Institute and developed by an independent ‘thought leadership’ team led by Dr Kevin Marshall, former chief executive of the Dairy Research Institute, and prepared in response to a call by industry senior executives, who challenged the Institute in 2010 at its annual summit to develop a strategy for science and education-led economic advancement of the New Zealand food industry.

Dr Marshall said: “Our strategies are neither new nor unique, but, in the past, implementation by industry has failed. Crucially, we have provided a pathway and a proposed mechanism for action that will work. There is urgency now because New Zealand faces a mediocre economic future if we don’t drive the major recommendations in this report to fruition.

“Agri-food leaders need to know what to do, how to do it and how to develop the resources they need to do it effectively.”

Welcomed by the Minister

Minister for Primary Industries David Carter welcomed the report, which he said was a vital contribution.

“The Strategy Report highlights that if we are to achieve the standard of living we aspire to by 2025, we must treble the real value of our food exports to about $60 billion,” the Minister said, adding that to achieve a target of real compound growth rate of seven percent over the next 13 years, New Zealand needs to close a gap of current progress of around three percent.

“While the agri-food sectors have been successful, we need to grow faster. To realise growth, we need to collaborate, be innovative, build on our strengths and continue to earn our reputation for safe, high quality food, produced in a sustainable manner.”

New Zealand is lucky to have repositioned itself away from traditional markets, which are currently facing problems, towards Asia. “In the past financial year, exports to China have jumped by nearly 40 percent,” he said.

The Strategy

The task at hand “will not be achieved with business as usual,” Marshall explained.

He outlined the four transformational strategies proposed in the report are to:

  • Selectively and profitably increase the quantities and sales of the current range of agri-food products.
  • Profitably produce and market, new, innovative, high value food and beverage products.
  • Develop value chains that enhance the integrity, value and delivery of New Zealand products and increase profits to producers, processors and exporters, and
  • Become world leaders in sustainability and product integrity.

Four ‘enablers’ back the strategies. These include the development of transformational industry and Government leadership, strong consumer-driven export marketing of branded and consumer and ingredient product, increasing the capability and skills of the agri-food industry and supporting industries and increasing the amount and effectiveness of investment in innovation, research, development and extension supporting the agri-food industry.

He said the think-tank determined that current food industry strategies have not been achieved as they “depended too much on government taking the lead” and that the “captains of industry have not stepped up to take the leadership role.”

For that reason, the most important proposal is to establish an Agri-Food Board “to be the focal point for sector leaders to work together and for industry to lead the work with Government, overcoming barriers to implementation.”

Elements of the strategy link in with thoughts in KPMG’s Agribusiness Agenda for 2012, ‘People Unlocking the Future’ ably presented at the launch Ben van Delden. It also reinforces what the meat industry is already doing with the Red Meat Sector Strategy, B+LNZ Ltd chairman Mike Petersen said.

Strategic echoes include opening access to markets, together with the sector becoming more consumer-driven and collaborative. Discussion also worked its way around the need to attract, develop and retain new graduates and workers for the agri-food sector, the need to develop leadership within the industry and for behaviour and attitude change.

Over 120 attended the launch in Wellington that was attended by the Minister, agri-food industry leaders and senior government officials. Also speaking was NZ Merino’s John Brackenridge. The report will be on the agenda at the forthcoming Primary Industry Chief Executives’ Boot Camp in August at Stanford University, California.

Meat industry leaders, including Keith Cooper of Silver Fern Farms, Sir Graeme Harrison of ANZCO Foods, Sam Robinson of AgResearch, were amongst those who had contributed to the report.

The report is well worth a read to see where the sector’s going. Download a pdf copy of A Call to Arms: A Contribution to New Zealand Agri-Food Strategy or ask for a hard copy by emailing [email protected].

 

NZ farmer confidence plummets

Federated Farmers has found that farmer confidence has plummetted in its latest Farm Confidence Survey.

In January, the mid-way point for the 2011/2012 season, farmer confidence in their profitability was strong. The 2011/2012 season was probably one of the best in recent times for meat, wool and dairy and would be difficult to top, says Federated Farmers‘ president Bruce Wills. However, this has gone fully into reverse gear with most farmers now expecting farm profitability will worsen over the coming year, he says.

“The past few months have seen large falls in commodity prices, with the June 2012 ANZ World Commodity Price Index down 12.3 percent from January. The exchange rate has not fallen to the same extent so has eaten into farmgate returns.”

The $64,000 question for all farmers at the start of the 2012/2013 season is whether prices will fall further. “We are all keeping a wary eye on the global economy and, frankly, we don’t like what we are seeing,” says Wills. “That New Zealand is ‘less bad’ when compared to Europe and North America, provides cold comfort when our dollar is kept artificially high because of it.”

The survey showed farmers continue to believe that prudent fiscal policy should be the Government’s highest priority – which is reducing government spending, balancing the books and reducing government debt.

Some headline results from the survey are:

  • A net 38.7 percent of respondents expect general economic conditions to worsen over the next 12 months.
  • A net 30.4 percent of respondents expect to increase production over the next 12 months (down from a net 47.7 percent in January).
  • A net 13 percent of respondents found it harder to find skilled and motivated staff (up 1.8 points from January).
  • Respondents’ biggest single concern is the level of commodity prices and/or farmgate prices, cited by 20.2 percent of respondents.

In the news this week …

We’re starting a new weekly round-up of the week’s top meaty news items. Changes to shipping arrangements have been front page news here in New Zealand and will probably be on the minds of delegates for next Monday’s Red Meat Sector Conference in Queenstown. But there’s also been a ‘world first’ for venison scanning, among other items.

Starting from next month, ports in Wellington and Nelson will be added to Maersk’s Southern Star run, which links New Zealand directly to the Malaysian hub port Tanjung Pelepas, according to the Dominion Post. The more reliable service with the dedicated hub will attract chilled meat exporters, Centreport’s operations general manager Steve Harris is quoted as saying, ” … because the time that the product is on the shelf in Europe … is critical.”

This followed the news, earlier in the week when shippers Maersk and Hamburg-Sud announced that they are withdrawing container pickups from the Port of Timaru, slicing $6 million off that Port’s annual revenue and resulting in the loss of about 50 port jobs. The service will be streamlined and will now operate from Napier to Otago. The new arrangements will come into place in mid-September, just prior to the start of the new meat export season.

Also in Timaru, in what’s said to be a “world first for venison scanning”, meat scanning technology already used for lamb and cattle is to be introduced for deer at Alliance Group’s new venison processing chain at Timaru’s Smithfield site later in the season.

Meanwhile, deer farmers are eyeing Europe, as exporters organise their chilled venison contracts for the European game season, according to a Fairfax news report. Venison prices are said to have “so far maintained a level of stability reflected in the meat schedule prices deer producers were being paid.”

New Zealand beef was amongst a ‘greymarket’ consignment of smuggled goods on a container ship seized by Chinese authorities after attempts were made to smuggle it into China. The frozen meat cargo worth US$10 million also contained other beef, chicken wings and pork from the US, Brazil and Australia. One Australian industry commentator has estimated the smuggled meat trade from Hong Kong, Schenzen and Vietnam accounts for 500,000 tonnes each year. Lower tariff rates for New Zealand meat, as a result of the free trade deal with China will make this trade less profitable for smugglers. However, concerns are for food safety of the smuggled perishable products as the cold chain may not be managed efficiently.

Click on any of the links to read more about each item.

Animal welfare initiatives

A number of animal welfare initiatives, including newly updated guidelines for animal transport within New Zealand, a review of the Animal Welfare Act 1999, development of a new national strategy, plus distribution of a revised toolkit for farmers are underway.

A newly updated Transport within New Zealand Code of Animal Welfare was issued by the National Animal Welfare Advisory Committee (NAWAC) in 2011, alongside a review of the code for Meat Chickens and a new Goats code, according to the Committee’s newly released 2011 annual report.

The Transport Code covers all animals transported by land, sea or air within New Zealand. It provides clarity about who is responsible for the welfare of animals at all stages of transportation and gives direction about how this must be achieved.

Committee chairman John Hellstrom, says the Code has been rapidly adopted by industry since its launch in September. “It is gratifying to see this code, like the earlier dairy, sheep and beef and pig codes being widely adopted within industry guideline.”

Other activities for the year covered in the annual report included developing advice for the Ministry for Primary Industries (MPI) and the Minister on aspects of the proposed revision of the Animal Welfare Act 1999. Among the issues considered were the future roles of the committee, the effectiveness of Codes of Welfare and alternatives, the welfare of wildlife and methods for increasing the transparency of NAWAC’s process and activities.

NAWAC is an independent advisory committee to the Minister for Primary Industries. It was established under the Animal Welfare Act 1999 to provide advice to Ministers on matters relating to the welfare of animals in New Zealand and to develop codes of welfare.

A copy of the new Code can be downloaded from MPI’s website, where a hard copy can also be ordered.

New national strategy

Alongside the review of the Act, MPI is also currently working on the development of a national strategy for animal welfare, which will set the future direction of animal welfare in New Zealand and outline the Government’s key priorities over the next few years, according to MPI’s newsletter Welfare Pulse. Input has been obtained from key stakeholders like vets, animal industries, animal advocacy groups and users of animals in research and teaching.

The final strategy and legislative proposals will be presented to the Minister for Primary Industries in late 2012 or early 2013. It is intended that an amendment Bill be introduced to the House during the first half of next year.

Revision of Animal Welfare Toolkit

This activity adds to the newly re-launched Animal Welfare Toolkit for farmers. This was released at the Federated Farmers conference recently and is now being distributed to farmers nationally. Beef + Lamb NZ Ltd, Deer Industry New Zealand, Federated Farmers and the New Zealand Veterinary Association were among the organisations working on the revision with MPI. A copy can be downloaded here (search ‘Animal Welfare Toolkit’).