Outlook for red meat remains positive, says SOPI update

Damien O'Connor, Minister of Agriculture
Damien O'Connor: "Farmers understand that a changing climate affects them."

The outlook for red meat and wool remains positive with strong red meat export and farm-gate prices offsetting lower volumes forecast for 2019, according to the latest  Situation and Outlook for Primary Industries (SOPI) report.

Export value for the year ending June 2019 is forecast to reach $9.6 million, up 0.8 percent from the previous year, the Ministry for Primary Industries’ (MPI) report says. Edible offal, processed meat, poultry and co-products continue to add to the sector’s export performance, offset by a weaker outlook for wool, carpets, hides and skins.

The main driver behind the higher forecast is a stronger outlook for beef and veal, while strong demand and production constraints in New Zealand and overseas are supporting strengthening sheepmeat prices.

In addition, about a third of the red meat sector’s export revenue now comes from products other than red meat. While export revenue from animal fibres – wool. carpets, hides and skins – has fallen over an extended period, exports of other products, including processed meat, edible offal, petfood, blood products and velvet, are increasing in share.

“This disparate group of products are unified by a focus on health and lifestyle and both of those themes are key drivers in global consumption trends,” the SOPI report says.

MPI’s Economic Intelligence Unit (EIU) has also updated its research following consumer response to alternative protein. This shows that while awareness and availability of the Impossible Burger and Beyond Burger is trending up, and venture capital investment is still being accumulated to fund its growth, uptake has decreased.

“A large number of the early adopters were likely people actively looking for a meat product substitute,” it notes. “As awareness grows, this uptake group will represent a smaller proportion of those who try the burger, reducing the uptake rate.”

Consumers are mainly drawn to eating plant-based meat substitutes for environmental, animal welfare and health reasons and are generally willing to pay a premium, the EIU research suggests. For those who do eat meat, taste is the most important factor for trial and purchase.

“Function remains a core issue for all alternative protein producers, with the Impossible Burger still unable to satisfy mainstream consumers in a manner comparable to meat-based equivalent products. This functionality will likely limit the potential for such alternative proteins to disrupt the current traditional meat industry until the product improves.”

The forecast is for the following year, to the end of June 2020, to fall back by one percent to $9.5 billion.

Primary exports to grow to new record high over the coming year

Minister of Agriculture Damien O’Connor notes the SOPI report forecasts the value of New Zealand’s primary sector exports is to grow by $505 million to a new record high over the coming year.

The Ministry for Primary Industries’ SOPI report forecasts a 3.8 percent increase for primary sector export earnings for the year ending June 2019 to $44.3 billion.

“There’s a lot to be positive about when strong consumer demand for high-value produce and good growing conditions have, in just the past three months, nudged up forecasts by an extra half a billion dollars,” says O’Connor.

SOPI December 2018“This shows primary sector exports will continue to be a strong contributor to the New Zealand economy, which is forecast to grow at about 3 per cent a year over the next few years.

“Primary sector export growth is due to a range of positive pointers that also reflect the importance of moving away from volatile raw commodity markets and into markets offering sustainable, premium returns.

“In particular for dairy farmers, good weather means plenty of grass and greater milk production at a time of growth in value-added products.

“This is set to be the fourth year in a row dairy export returns have risen following the dairy downturn of 2015 and this is why it’s vital we add value to every litre of milk produced in New Zealand.

“The results are promising but there are uncertainties in the global marketplace such as the trade dispute between the US and China and Brexit, which means instability across commodity prices, exchange rates and equities.

“As the outlook notes, there is increased risk beyond 2019 and this is why the Coalition Government is pursuing high-quality free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

“For future growth, we need to get more value for what we produce now, and we are focused on helping our primary sector to achieve this sustainable, value-added growth that ultimately benefits all New Zealanders,” says O’Connor.

The full outlook can be found here.

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