After a generally positive 2015 for the New Zealand red meat sector, Meat Industry Association (MIA) chief executive Tim Ritchie reflects on the year and what lies ahead in 2016.
2015 saw significant progress in a number of trade negotiations, which look set to benefit the industry. The most immediate benefit will come from the NZ-Korea free trade agreement (FTA), which was ratified by the Korean parliament in December.
With an immediate tariff-rate cut when the FTA came into force in late December, followed by more cuts on 1 January 2016, this means New Zealand’s red meat exporters are able to maintain their competitive position against Australian and US competitors, both of which had gained a tariff advantage through their own FTAs with the country, comments Ritchie.
It’s a significant step towards reducing the tariffs paid on New Zealand red meat exports and which, in turn, will help stem the recent loss in market share.
The conclusion of the Trans-Pacific Partnership (TPP) negotiations late last year was also a significant milestone. When ratified by all the parties, the TPP will over time eliminate, or substantially reduce, the tariffs on exports into major markets such as the United States and Japan allowing New Zealand to be competitive with a level playing field.
New Zealand exports beef, sheepmeat and co-products worth $2.4 billion to the TPP member countries, over a third of our exports around the world. Once implemented, calculations show the TPP will deliver over $72 million in tariff savings a year for the red meat sector.
The MIA is also looking forward to progress in the talks with the European Union (EU) for a FTA.
“New Zealand is only one of a small number of countries that do not have a preferential trade agreement with the EU, although it is a very significant export market for New Zealand red meat products, worth nearly $1.9 billion for the year ended December 2014,” Ritchie says.
“It is New Zealand’s largest market region for sheepmeat exports and second-largest for chilled beef exports. Securing an FTA with the EU is the logical next step in strengthening our trade relationship” notes Ritchie.
Tightening supply of NZ sheepmeat and beef into 2016
Given New Zealand’s pasture-based sheep and beef production systems, the weather is likely to continue to shape production and supply to market this year, Ritchie notes.
Continuing drought on certain parts of the east coast of New Zealand, exacerbated by the El Niño weather pattern is leading industry commentators to predict that a tightening supply of sheepmeat is on the cards as the season progresses.
Beef + Lamb New Zealand (B+LNZ)’s Economic Service recently forecast that the lamb crop for 2015/16 will be the lowest in nearly 60 years, with an 8.1 percent decrease in export lamb slaughter, some 1.72 million fewer lambs.
Ritchie notes that with early season lamb processing being well ahead of last year, this significantly lower overall lamb crop means that market supply will likely tighten as the season progresses.
The Economic Service also forecasts there will be some tightening of New Zealand’s beef supply with fewer cattle being slaughtered in 2015/16 compared to the very high slaughter levels, particularly of cull dairy cows, in 2014/15.
The US has continued to dominate as New Zealand’s number one beef market, taking more than half the beef by volume and value in the year ending September 2015.
This is a clear indication of the strong demand for New Zealand product in the US.
China has also been a major growth market for New Zealand beef exports, taking 54 percent more New Zealand beef in 2014/15 compared to 2013/14.
China now imports some NZ$1.5 billion of New Zealand meat per annum, an extraordinary rise since the free trade agreement was signed in 2008.
Overall, while the ongoing dry conditions may provide challenges for the sector as the year progresses, the underlying supply and demand fundamentals for New Zealand beef and sheepmeat remain favourable.
This article has appeared in Food NZ magazine (February/March 2016) and is reproduced here with permission.