Westpac dissects NZ meat industry carcase

Westpac is the latest bank to attempt a dissection of the New Zealand meat industry’s carcase.

The bank published its latest report Industry Insights: Meat and wool earlier this week.

“The meat and wool sector faces a number of challenges including processing overcapacity, a modest outlook for lamb and wool products and the perennial question of how to maximise dollars per kilogram of product,” the bank’s industry economist David Norman succinctly summarised.

The economists noted the sector is the largest primary sector employer in New Zealand, with more than 100,000 full-time equivalent workers, employing twice the number of workers than the dairy sector. Meat and wool accounted for $8.1 billion in exports in the year to August, accounting for around four percent of GDP – half of that on-farm.

They spoke to a large number of farmers, meat and wool processors, farm advisors and farm support businesses among others, to get their views on what the biggest risks and challenges were for the sector.

They found these included: falling sheep numbers and resultant overcapacity which have reduced profitability for processing; overall export weaknesses for products other than beef, with gains in that product at risk in the US market (remember this came out before the US election); a growth in competition from an increased number of countries trading meat and wool; and also a rise in popularity of cheaper protein sources like chicken. Other challenges are the rise in non-tariff trade barriers and emerging risks to free trade and increasing  risks to the sector maintaining approval from the public and government to operate as it currently does.

On the upside, opportunities for growth will be drive by higher prices for New Zealand meat products and by lower costs of production, rather than by volume increases as the number of sheep and beef cattle continues to fall, says Norman.

“One of the biggest weaknesses, and thus opportunities, for the sector, is the lack of a coherent New Zealand brand internationally,” says Norman, who believes New Zealand has largely failed to communicate the right ideas about its meat and wool products.

“A more concerted effort is required to tell the story of New Zealand meat and wool and to create preferences for our products in the way some sectors have.”

A second opportunity to increase prices is to ensure each product sells to the highest paying market.

“Finally, vertical integration, particularly in wool, as well as scale and commercialisation of the family farm are required to adopt technology and other cost-cutting measures to make production cheaper,” says Norman.

The Westpac economist expects to see a number of trends emerging, or continuing, in the future. These are: a continued reduction in sheep numbers, a reduction in meat processing capacity “a slow and expensive process”, weakening beef exports and an ongoing challenges in accessing capital due to poor returns. Anti-trade sentiment and increased compliance costs will  also figure in the future, Norman wrote.

 

 

1 Trackbacks & Pingbacks

  1. Telling a very good story for the #redmeatsector - MeatExportNZ

Leave a Reply