“Considerable uncertainty” ahead in red meat markets

The coming year will be testing for New Zealand’s red meat exporters, with considerable uncertainty in some of our key overseas red meat markets.

The Meat Industry Association (MIA)’s 2016-2017 recently released annual report shows that hope is pinned on the remaining countries in the Trans-Pacific Partnership (TPP-11) coming to an acceptable agreement to capture the significant gains of the original agreement.

“Of particular importance to us is creation of a level playing field in certain markets, such as Japan, where competing countries already have significant tariff-free advantage through bilateral trade agreements,” notes MIA chairman John Loughlin.

A 26 percent volume and seven percent value increase in beef exports to Japan in the year to end June 2017 was tempered as import trigger levels for increased tariff levels were reached. Without a free trade agreement with the market, New Zealand continues to be disadvantaged compared to competitors, the report reveals.

Another source of uncertainty identified in the report is Brexit – Britain’s withdrawal from the EU. The New Zealand red meat sector has 135 years of experience servicing the UK, New Zealand’s major high-value market for chilled lamb legs, which can account for up to one-third of the entire value of a carcase.

“The UK is an extraordinarily important market for New Zealand,” says MIA chief executive, Tim Ritchie, who has first-hand experience working in the market in the 1980s and 1990s.

“Preserving the market stability our industry has worked hard to establish, as well as our existing market access rights, is therefore a key focus for us.”

The report shows Brexit uncertainty has already had an effect on both currency exchange and market confidence, leading New Zealand  sheepmeat sales over the 2016-2017 year to that market to fall by 26 percent in value and 22 percent in volume.

According to Ritchie, the meat industry recognises it is the biggest issue that it has faced in a number of years.

Given the importance of the Brexit process, MIA and Beef + Lamb NZ have committed to jointly funding a senior person in London for a two-year period to ensure the voice of the New Zealand meat industry is heard at this critical time.

Thankfully, anti-globalisation does not seem to have entirely taken hold around the world, the report notes, with talks underway for a EU-NZ free trade agreement (FTA), the Pacific Alliance and the TPP-11, plus new access for the Iranian market and an upgrade for the FTA with China.

The  2016-2017 year saw a drop in the value of New Zealand’s exports of sheepmeat, beef and co-products to $7 billion in the year – $600,000 less than the previous year, which was a record year for New Zealand’s beef exports.

The fall was due in part to global prices declining as demand softened with US and Australian cattle supplies coming back on stream after drought and also pressure on currency exchange rates. Lower quantities of livestock were also available in New Zealand for meat production, with better pasture growing conditions and the need to rebuild herds and flocks after drought here.

Two countries accounted for exports of more than a billion dollars, the US ($1.59 billion) and China ($1.44 billion), with the next markets some way behind – the UK ($459 million), Japan ($320 million) and Germany ($294 million). The top five markets accounted for 58 percent of total exports in 2016-2017, the report shows.

Other red meat trade highlights:

  • New Zealand red meat is exported to 122 countries around the world
  • Seventeen countries took exports worth over $100 million
  • Frozen red meat still forms the majority of the sector’s exports
  • However, chilled beef exports are growing, rising by 12 percent in value and seven percent in volume in the 2016-2017 year
  • The EU is the highest value region for New Zealand’s sheepmeat, taking $1.17 billion in 2016-2017 – 40 percent of total exports
  • Co-products, an important part of the industry’s business model to use and valorise all parts of a carcase in the best returning market, accounted for $1.46 billion in 2016/2017, a decline of four percent from the previous year.

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