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].

 

Recommended reading …

The development of electrical stimulation of meat, how New Zealand pharmaceuticals were founded on gall, protein quality, animal genomics and the people behind each are just some of the inspiring stories of New Zealand agri-food innovation contained in a book from the Riddet Institute.

Floreat Scientia, published for the Riddet Institute by Wairau Press, 2011. ISBN:978 1 927158 081.

Farmers recycling more plastic

More than 650 tonnes of plastic farm waste has been recycled nationwide during the past year thanks to a government-funded scheme, according to the Environment Minister amy Adams.

Under the product stewardship scheme, Plasback supplies more than 1,000 recycling bins to New Zealand farms and collects agricultural plastics such as bale wrap, silage wrap and covers, agrichemical containers and crop bags. The waste is then recyled into plastic resin pellets and then reused in new plastic products.

“Many farmers have been frustrated by the lack of options for dealing with plastic farm waste and know that burning or burying waste is not a sustainable option,” Adams says.

“This voluntary scheme is about getting alongside farmers and providing an environmentally-friendly alternative.”

The programme received $130,000 from the Government’s Waste Minimisation Fund which supports projects that increase resource efficiency and decrease the amount of waste going to landfill.

Product Stewardship Schemes, which meet the criteria for reducing waste and environmental harm are accredited by the Minister for the Environment.

Transformational change (and how to make it)

One farmer who has made transformational change to his farm business is Marlborough farmer Doug Avery.

In an inspirational and entertaining presentation at the Red Meat Sector Conference, he talked of working “smarter and harder” and the need to “lift yourself up above and see what’s going on around you.”

The tipping point that made him see that he needed to change was sustained drought in the region, over a period of eight years,  which meant that Bonavaree Farm and the Avery family were facing a very uncertain future. In 1998, Doug Avery attended a seminar where Lincoln University pasture Professor Derrick Moot proposed using lucerne as a primary grazing pasture plant. Using that idea started change.

In 2004, with the area still gripped with drought, the NZ Land Care Trust answered a call for help from Avery and a few other farmers. A six-pronged attack on failed systems was engaged with science and the help of funding from the Sustainable Farming Fund and others. This saw the transformational change of the operation from one of failure to one of success.

Having run the emotional gamut of the ‘Three Ugly Sisters’ – envy, anger and blame – Avery realised, when he started looking, that there were some things he could control and others he was concerned about – climate change, weather and the value of the dollar – that he had no control over at all.

Avery realised three things: that the farm business could run 44 percent less sheep but only produce five percent less product; also, that a one percent increase in soil carbon can increase water holding capacity by 144,000 litres per hectare; and, finally, “how much time do we spend telling our story?”

Change of mindset

A change of mindset was also needed, he decided. He would work in what he calls the influence circle, become proactive not reactive, move to solution and enquiry (away from blame and excuse), he would influence thinking and adapt his business systems to the changing climate.

Better practice influenced the systems in place at Bonavaree, says Avery. The year was broken down into three periods: the risk period from mid-December to mid-February where they farm as little as possible; the recovery period from mid-February to late winter, when crops are grown on summer-fallowed land and ewes and hoggets are mated on lucerne and the system charges back into life; and the revenue period, from late summer till mid-December.

“We grow our stock at fast rates to finishing weights before the summer dry,” he said, adding that ewes wean fat and the ewe weights are heavy.

Precious water was conserved by using summer fallow, which intercepted the weed cycle, storing water and creating a water reservoir. Organic matter was built into the soil by stopping tillage. Plants were used that could tap water from deeper layers and also create rapid animal growth and performance. Finally, animals were made for performance, using designer genetics.

Results

The results today speak for themselves. “Lots of wonderful lambs that grow like mushrooms”, and “hogget scanning gone from 40 percent to 165 percent”.

Today, Bonavaree has 1,500 hectares owned and 280 ha leased which will be wintering 13,000 stock units this year (5,000 sheep, 1,650 cattle), growing 90 ha of lucerne for seed and the family is retiring an increasing number of natural areas production. The property has six full-time staff and lots of busy contractors.

Better practice

Better practice for Avery is about using quality contractors, rather than trying to purchase expensive machinery and do it himself, using smart systems like Farmax, inspiring the young who learn by what they see, working with good value chains and smart brands, growing top crops and lambing onto top quality feed, he said.

Reminiscing to the start of his transformational journey, Avery said: “I always wondered why somebody didn’t do something about that, then I realised I am somebody.”

His message for farmers looking to create resilient businesses is to create relationships, manage the soil and water “more crop from every drop”, look at the plant selection for sites and purpose, manage feed supply and demand, work with the natural forces of the local climate, collaborate with science, agency and industry, engage in processes which create financial reward and to create a culture of excitement and fun in the work place.

Bonavaree is now looking to build on its successes through improved management structures, more measuring and collaboration through FarmIQ, better feed conversion in the rumen, improved plant mixes and genetics (plant and animal) and enhanced native plantings and over lay business, says Avery.

Doug Avery has received a number of award for his work at Bonavaree including the 2008 Green Ribbon from the Ministry for the Environment, 2010 Lincoln Foundation South Island Farmer of the Year, 2011 Marlborough District Council Farm Environment Award and the 2012 New Zealand Land Care Trust Ambassador title.

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.

Production boom confirmed by MPI

The production boom, alluded to by several at the Red Meat Sector Conference, has been confirmed in the Ministry for Primary Industries (MPI)’s latest primary industry statistics released today. They show increased production of beef and sheepmeat, corresponding with growth in the export volumes for the meats, but falls in export revenue earned from lamb and venison.

Primary Industries Production and Trade‘ for the March quarter 2012 is the first release of a new combined primary industry quarterly report, comprising production and trade statistics for the meat, dairy, wool, forestry and seafood industries. It replaces separate quarterly reports for forestry and seafood that were previously released by the Ministry.

The report shows that the primary sector continued to be an economic driver, with total primary sector exports accounting for 71 percent of all merchandise exports in the year to March 2012.

MPI reports favourable climatic conditions led to a continuation of better-than-usual pasture growth during the March 2012 quarter. As a result, farmers achieved near-record carcase weights for slaughtered livestock and an 11.5 percent increase in milk solids’ production, compared with the same quarter in 2011.

However, the stronger New Zealand dollar coupled with easing international dairy prices meant that overall primary sector export revenue for the quarter was down 2.4 percent on the previous year, at $8.3 billion.

At the same time, total export revenue for the year to March 2012 was up 6.2 percent on the previous year at $32.3 billion.

In the year to the end of March 2012, exports of New Zealand’s beef and veal, lamb and mutton, venison and other meats, earned revenue of $5.6 billion, while hides, leather and dressed skins added a further $591 million to the export pot. This made a total of $6.233 billion, accounting for 13.6 percent of total NZ merchandise exports.

According to the report, beef production increased by 1.4 percent in the March 2012 quarter (compared with the March 2011 quarter), due to increased carcase weights, the highest since 2006. This was despite lower adult cattle slaughter numbers. Lamb production was up 2.4 percent because of increased slaughter numbers and a record average carcase weight of 17.6 kg.

The volume of beef and veal exported increased 1.3 percent to 98,450 tonnes in the March quarter, in the March quarter, while export value decreased 4.5 percent to $570 million because of the strong New Zealand dollar. Beef and veal exports to New Zealand’s major export market, the US, increased 9.3 percent by volume and 5.3 percent by value because of stronger demand.

Export volumes of lamb increased 4.7 percent to 79,000 tonnes, while export values decreased 1.3 percent to $722 million. Lamb exports to New Zealand’s main market, the European Union, decreased 9.1 percent by volume and 9.6 percent by value, which the report says was due to a decrease in frozen export volumes and increased export sales to China and OPEC.

Revenue earned from venison exports fell slightly by 0.4 percent at the end of March 2012, compared to the previous year, though volume had dropped by 4.3 percent.

A pdf copy of the report can be downloaded by clicking the link below or at the MPI website (search on ‘Primary Industries Production and Trade’).

MPI-Prod&Trade-March2012 quarter

The future is bright

The future looks bright for New Zealand’s red meat export business, if you go by the presentations at the recent Red Meat Sector Conference in Queenstown.

Over 250 delegates, drawn from processing, farmers, service companies, shippers, economists, and government officials, crammed into the Rydges Lakeland Resort hotel on Monday 16 July for an absolutely packed itinerary of presentations from 17 excellent speakers – several of them from overseas – all with inspirational and thought-provoking messages.

The veritable smorgabord of information, mustered back into its time slots by some able session chairmen, revealed recurrent themes of massive potential for New Zealand meat in emerging markets in Asia, especially China, water issues, the need to engage in best practice, to tell the industry’s story to the public and the rapid, mind-boggling change the emergence of social media has wrought on getting those messages out there.

The first early shoots of progress on the Red Meat Sector Strategy (RMSS) were evident too, not as fast as some would  like, but it’s a start. Nearly a quarter of billion dollars of industry-government money is being spent on re-shaping and vertically integrating some parts of the red meat chain over the next seven years through Primary Growth Partnerships (PGP) programmes. These are alone forecast to add somewhere in the region of $3 billion to the country’s GDP by the mid-2020s. Meanwhile B+LNZ Economic Service’s team, under the guidance of Rob Davidson, have been developing a natty set of matrices that will enable industry to see how it is progressing along the Strategy’s path (more of that later).

Delegates will be picking out of it what they need. They were certainly upbeat and eager to hear more right to the last speaker of the business sessions, Nigel Latta, who talked about behavioural change and how to make it.

There is no doubt that more is bound to come from discussions at conference and later. Well done to the joint organisers, the Meat Industry Association and Beef+Lamb NZ Ltd.

A more full report will appear in Food NZ August/September 2012 magazine in early August and MeatExportNZ will be covering other items emanating from the conference over the coming week or so. You can find most of the presentations already up online at the MIA website, along with the programme.