The sheep and beef sector’s export earnings in the year ended June 2015 were $1 billion more than the previous year and, while there will be volatility in many markets, the future is looking promising for the sector. New Zealand’s red meat fraternity learned this and more as they gathered in Nelson for the fifth annual Red Meat Sector Conference, jointly organised by the Meat Industry Association (MIA) and Beef + Lamb NZ Ltd (B+LNZ).
The programme which was, once again, designed to inspire and challenge drew more than 230 delegates drawn from red meat processors and exporters, researchers, service companies, farmers and others to attend the event. As in previous years, the conference was built on the core themes of the Red Meat Sector Strategy (RMSS): coordinated in-market behaviour; aligned procurement; and adoption of best practice.
Progress against the RMSS was reported by B+LNZ chief economist Andrew Burtt, who revealed that income from all markets for meat and meat products rose to $9.5 billion in the year to end June 2015, $1 billion more than reported for the previous year. This has been mainly due to increased beef exports at higher prices to the US and also to China, combined with a more favourable exchange rate later in the year and is a significant step forward towards the sector achieving the goals of the RMSS.
Ahead of the Conference, B+LNZ had already released analysis showing that beef and veal returns were up 37 percent in the first nine months of the export season, running from 1 October 2014 to end June 2015, against the same period the previous year.
Thje main reasons were strong demand for New Zealand beef and veal principally from the US, and also China, coinciding with high New Zealand beef production thanks to last summer’s dry conditions. Other previously released B+LNZ analysis pointed to the nine months from 1 October 2014 to end June 2015, reaching a record high of $2.53 billion for beef and veal, up $686 million compared to the corresponding period the previous season.
While Chinese demand for New Zealand sheepmeat has been falling back, it was still relatively strong and was partly offset by increased tonnages to the European Union, North America and the Middle East. The total value of lamb exports remained relatively stable at $2.06 billion.
A weaker New Zealand dollar has also contributed to this season’s higher average export values across all products, says B+LNZ.
In the first nine months, the average value per tonne of beef and veal exports was pushed up by 26 percent, to $7,440 per tonne, compared with $5,900 last season. Lamb averaged $8,646 per tonne, up by 3.9 percent.
B+LNZ also calculated that New Zealand’s free trade agreements to date had delivered tariff savings of $161 million on the nation’s sheep and beef sector exports in 2014 and says that the amount is set to grow as tariffs continue to reduce and export volumes grow.
RMSC as much about contact as content
In his opening comments, MIA chairman Bill Falconer noted that the annual conference was as much about contact as well as content. Overall, he said, the industry “hadn’t had a bad year”.
Using the RMSS as a guide, industry was lifting its game with Primary Growth Partnerships such as FarmIQ, FoodPlus and NZ Merino, plus the companies’ own commercial programmes. Industry is learning how to deal with trading with China – leading on from the recent Chinese delegation to New Zealand (see page xx) and a further New Zealand meat industry delegation to China planned for later this year. It now needs to deal with the shifts in consumer purchasing behaviour making sure that distribution chains are “bolted into” online sales, he said.
Falconer said the sector was fortunate to have the free trade agreement in China, but noted that other markets such as Indonesia need the industry’s equal attention and was hopeful that the Trans-Pacific Partnership will be concluded soon.
He thanked personnel at the Ministry of Foreign Affairs & Trade (MFAT) and the Ministry of Primary Industries for their relentless efforts on the industry’s behalf.
Environment top of minds
Delegates’ minds were focused from the start on the environment, an important theme for primary production in 2015. A speakers’ panel on the Sunday evening, included the winners of the 2015 Ballance Farm Environment Award Catherine and John Ford, Fish & Game chief executive Bryce Johnson, and Landcorp’s national manager technology and property, Phil McKenzie, and explored how the sector might earn its environmental social licence. The session concluded that better visibility for the good environmental work those in the industry are doing, inclusion of iwi, local government and non-governmental environmental organisations and sincerity in the stories told are all part of the recipe for success. The panel was facilitated by political pundit Colin James of Synapsis, who also spoke on the Monday on ‘Navigating Choppy Economic and Political Waters’.
View across the Tasman
One of the keynote speakers was Dr Michele Allan, chair of Meat & Livestock Australia who spoke in the afternoon. The organisation is owned by Australian red meat producers and looks after research, development and marketing services for Australia’s red meat industry.
Allan outlined the organisation’s recent restructuring, which was aimed at better meeting levy payer needs. She explained that new managing director Richard Norton is leading the organisation’s focus on efficiency and effectiveness with A$6 million saved in costs, improved consultation and transparency with industry and key players, a new system of direct regional consultation on R&D priorities and skills-based board appointments.
She noted that MLA is projecting an investment from R&D and marketing levy funding, matched with Australian government funding, in 2014/15 of around $175 million (A$157 million) on projects targeting grass-fed cattle (42 percent of the spend), grain-fed cattle (eight percent), sheep (nearly 30 percent), goats (0.75 percent) and A$18.4 million of it on the MLA’s domestic and international marketing activities (18.8 percent).
Enivronment and animal welfare is a big issue for the Australian industry, as it is over here. Australian producers’ environmental efforts have resulted in a 65 percent reduction in water use and a 14 percent fall in emissions by the Australian meat industry over the past 30 years, MLA has calculated. This is proof, it says, that the Australian industry is responsive to community concerns.
“MLA is now 100 percent focused on delivering value,” said Allan, adding that she thinks they’ve positioned the Australian industry well for the future.
Meat industry trends
Delegates had heard earlier that day about the latest meat industry trends from some excellent New Zealand and international speakers.
Volatility was the recurring word used by several in the trends section of the conference. The international and domestic meat industry scene was set by European market research consultancy GIRA’s Richard Brown, who gave his annual update on the global trade in all meats, then focused on prospects for beef and sheepmeat. He noted that with its better economic conditions 2015 has been a year of consolidation after 2013’s drought emphasis and the market contradictions of 2014.
He pointed to the changing sheepmeat trade patterns in a global market dominated by demand from China, with weakening demand in both China and the EU, marketing pressures in the Middle Eastern and North African (MENA) and other developed markets. This suggests a depressed outlook for sheepmeat in the near future. He suggested New Zealand exporters develop a specific strategy to target the hard discounter retail chains that are disrupting the usual trading patterns in the UK and European markets.
However, the future for beef around the world is still looking bright, according to Brown. With tight supply and a reasonable demand environment, GIRA is expecting the current price levels to be maintained in the foreseeable future.
Arron Hoyle, previously a senior manager with McDonald’s in China, and now with Black Dragon Advisors gave a useful insight into the market in China “where the customer is evolving and everything is broken,” he said. He challenged the red meat sector to stop using nouns – commodity – when talking about New Zealand meat in China and to start using ‘adjectives’ and adding value.
“Stop talking to ourselves and get focused on the consumer,” he urged.
His views were echoed in observations on ‘Profiting from Peak Meat’ from the ever entertaining Professor David Hughes, emeritus professor of food marketing for Imperial College London. “New Zealand is blessed because it’s into premium meats which earn around three times more than the white meat alternatives,” he noted.
Consumers around the world have less and less time to spend in the kitchen, he said, adding the eating format has changed radically towards individually focused dishes, which are meal solution-based, rather than meat-based. Amazon is even venturing into restaurant meal deliveries direct to home, which typifies the convergence of traditional restaurant and retail offerings. The red meat sector needs to accommodate these trends, said Hughes.
“If there’s a global trend, it’s towards snacking,” he believes. “You don’t see many meat snacking foods, apart from jerky, which has had something of a renaissance.”
He also thinks that incidence of food fraud will rise and there will be a need for more transparency and traceability in the food chain.
“So, red meat’s future is bright, but crash hats on!” he said, concluding that “New Zealand’s provenance is golden. Don’t stuff it up!”
Other speakers included Rabobank meat industry analyst Matt Costello whose topic was ‘Maximising the Cut – Breaking it All Down’.
How technology disrupts industry was the topic of Dr Mary Quin chief executive of Callaghan Innovation’s ‘Innovation or Oblivion’ presentation. One example of a new technology that she discussed was synthetic meat, which she believes the red meat sector should view as an alternative rather than as a competitor to high quality natural red meat.
On-farm issues were covered by Steve Carden, Landcorp chief executive, who presented his views on ‘How changing consumer tastes are changing the way we farm’. In addition, Marc Elliott, a UMR researcher, showed what the drivers are for high performing farmers: passion for what they do and family first
Networking and more …
The excellent social events, including Sunday evening’s Hamburg Sud Welcome Cocktail Function and the Maersk Line NZ Gala Dinner, preceded by the Rabobank Networking Drinks on Monday night, provided the opportunity for delegates to network and discuss red meat industry topics.
More information and conference presentations will be online in due course at www.redmeatsector.co.nz.
This article has appeared in Food NZ magazine (August/September 2015) and is reproduced here with permission.