Tag Archives: export

Lower lamb prices expected, but firm for beef

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MPI Situation and Outlook update December 2012New Zealand’s meat processors and farmers can expect lower lamb prices over the remainder of the 2012/2013 production season, while beef prices are expected to remain firm over the next two years, says the Ministry of Primary Industries (MPI).

Deteriorating global economic conditions are having a significant impact on returns for New Zealand’s primary produce, according to the MPI’s recently released half-year update to the annual Situation and Outlook for Primary Industries report, which was published in June.

The update shows there has been strong pastoral production so far in the 2012/2013 season. “This is partly due to favourable climatic conditions during the previous season which left breeding stock in good condition and also ongoing expansion of the dairy herd,” says Chris Jones, manager of economic information and analysis for MPI’s sector policy division.

However, MPI reports the continuing economic slowdown, particularly in the traditional markets of the European Union, is causing weaker demand for some products such as lamb resulting in lower lamb prices. In addition, the strengthening of the New Zealand dollar against most major trading currencies in recent months is having a dampening effect on farm-gate returns for primary produce.

In contrast, beef prices are expected to remain firm over the next two years, following a major drought in North America affecting production there.

As a result, primary sector export revenue for the year to June 2013 is forecast to be around $27.5 billion, down five percent on the previous year ($29.2 billion).

 

 

Eventful year for meat training

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It’s been an eventful year for meat training, with the merger of the meat and dairy sectors’ industry training organisation (NZITO) and the Seafood ITO to create a major export food ITO, which is generating synergies that will benefit all.

The new single ITO entity, using the NZITO name and branding, has been in operation since the beginning of August and is now servicing a combined workforce of over 60,000 employees covering New Zealand’s three key export food industries – meat, dairy and seafood.

“There are many obvious synergies we are now taking up, such as knife skills and rendering and there will be more shared servicing over time as we maximise staff and training to keep costs in check,” reports general manager Carl Ammon, who has stepped up from leading the meat and dairy ITO to head the new body, adding that there are new skills in the team that are all adding value.

Ammon is delighted to share that the new NZITO is delivering at the top of the Tertiary Education Commission’s Educational Performance Indicator tables. “Which is creditable as our industries are seasonal and not based around trade apprenticeships, unlike building or engineering,” he says.

The move to a single enlarged ITO has been strongly supported by the Meat Industry Association (MIA) with chief executive Tim Ritchie pointing out that ITOs provide training that many people would not otherwise get, as it is delivered in the workplace and allows for the seasonal pressures of the agricultural industry.

“The ITO system is an invaluable asset for out industry, and this merger can only make it stronger. The merged ITO will allow our people to learn and up-skill themselves while they work and offers clear opportunities for career development in our industry.”

When he announced  the merger, NZITO chair Graeme Sutton said that training offered through the NZIITO will carry more status in the primary sector and the community as a whole.

Because of its increased ‘buying power’, Sutton said that the ITO will be able to demand high standards of delivery from its training providers. There will also be greater emphasis on training skills that are transferable across the food export sector, creating more opportunities for personal advancement, he said.

The new NZITO board includes two representatives each from the meat, dairy and seafood industries. Representing the MIA, and the meat industry, on the board are Carolyn Thompson, HR Manager for Taylor Preston Ltd and Kerry Stevens, Group HR and Communications Manager for Alliance Group Ltd.

There is also a meat advisory group (MAG), comprising representatives from a number of meat companies, which provides industry input to the NZITO. Similar groups have been set up for the dairy and seafood sectors.

Qualifications now under review

Recent work for the groups includes input to the nation-wide Targeted Review of Qualifications (TRoQ), aimed at simplifying the qualification framework, rationalising the number of qualifications and seeing where updates are needed. Proposals are expected to go forward to NZQA in early 2013.

The work is going well, says Ammon, adding that it is using best practice examples between sectors and will allow for qualifications that are simpler to follow and use and that still provide a learning pathway for staff.

“We are focusing on the generics and people skills like communications, problem solving and team work as well as food safety, market access, quality, biosecurity and supply chain.”

Apprenticeship pathways, proving very popular for meat companies and others, are to be rebuilt. “This uses the qualifications and packages them to the level of a well-rounded and capable operator able to take on technical and leadership responsibility.”

The TRoQ review is also building in the future needs that are arising from drivers like automation and robotics that are now expanding in use across the sector. “This mirrors past experience in the dairy industry, so we can benefit from that experience here,” says Ammon.

Health and safety skills and knowledge are being integrated into core training, alongside the running of specialist Occupational Health and Safety qualifications.

Management development and productivity improvement qualifications are being retained, “as these have been used to good advantage by many companies in building both people and organisational performance,” says Ammon.

The NZITO is also planning to implement with other ITOs, such as hospitality, a base food sector qualification aimed at schools and pre-employment. “This will reinforce the career pathways plan of the Ministry of Education and support trade academies and schools delivering trade-focused skills to students who have a career planned in industry.”

What’s next?

The NZITO is now working closely with other primary sector ITOs in the planning of a primary sector platform to coordinate qualifications and training. That will harmonise with Ministry of Primary Industries (MPI) requirements in areas like traceability, transport and animal welfare.

“This will help us to harmonise much that is in common in the food export areas and is intended to reinforce the value chain or paddock to plate concept this is a key driver in New Zealand exports,” Ammon explains.

Practical examples would be common HACCP training standards, animal welfare, animal products inspection and initiatives like halal standards for key markets. “This is also intended to complement our adaptation to expectations from key markets for a standards based approach to the supply chain,” he says.

The NZITO/Seafood ITO merger is part of the reconfiguration of the ITO sector into larger, more capable organisations to better meet the needs of employers. In October, the agriculture and horticulture ITOs also merged into one organisation, under the Primary Industry Training Organisation banner.

“Work is progressing on the prospect of a consolidated primary sector ITO that will deliver greater efficiencies in scale, coverage (market share) and resourcing flexibility,” says Ammon. “Early work shows real potential for savings and improved services so this will be a work in progress for 2012/2013.”

This item appeared first in Food NZ magazine (December 2012/January 2013).

 

Pet food and jerky emerging as export growth opportunities

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Pet food and prepared/processed beef products like beef jerky, or biltong, are two emerging growth opportunities for the New Zealand meat industry that have been identified in a newly released Coriolis report An Investor’s Guide to Emerging Growth Opportunities in New Zealand Food and Beverage Exports.

Strategic management consultants Coriolis carried out the report on behalf of the Ministry for Business, Innovation and Employment (MBIE) to identify emerging high potential food and beverage export categories.

The report filtered out various export categories over $100 million each, such as boneless frozen and chilled lamb, bone-in sheepmeat, boneless and bone-in frozen and chilled beef, meat and edible offal (including venison), fats of beef, sheep or goats, as they “represent New Zealand’s core food and beverage exports” and also categories under $2 million. This left a core 129 categories for analysis.

Pet food and jerky were two of the initial 25 categories short-listed for their emerging export growth potential. Two more meat industry related categories – protein concentrates and textured protein substances and sausages – just missed the initial cut, with frozen chicken cuts also being dropped out of the final 20 as it had low potential export growth.

Pet food has a large global market, strongly growing demand and opportunities for growth in Asia, especially China, Australia and other rich countries, the analysis shows alongside information showing the category is capital intensive, requires some skills and has moderate trade access. Pet food has already attracted investment from US-owned Watties and Mars NZ and Swiss-owned Nestle NZ. Currently, exports are worth US$169 million, out of a global market worth US$13.8 billion, but the “possible size of the prize” by 2025 could be in excess of US$500 million, says Coriolis.

Beef jerky has received inward investment from US company Jack Link’s, which has grown the category markedly in recent years. New Zealand’s exports of processed/preserved beef are currently worth US$83 million, out of a global market worth US$7.4 billion, but he potential prize lies between $100-200 million for the category to 2025, says Coriolis. Opportunities lie in Asia, but making jerky is a capital intensive process that requires skills.. The UK is seen to have potential for the product

Report: a “vital resource”

New Zealand Food and Grocery Council chief executive Katherine Rich says the report is a vital resource for anyone in the food industry or someone looking to invest in it. This is the first time this information has been collected in such as easy-to-reference format.

“The food industry is the backbone of the economy and is always looking for investment to grow export opportunities. It is important that this additional investment is attracted so new Zealand can take advantage of the significant growth opportunities presenting themselves, particularly in Asia as the middle class there grows,” she says.

“It is perhaps not surprising that the sectors identified by the report as showing the greatest potential to grab these opportunities are ones where New Zealand could have a competitive advantage: salmon, honey, spirits, biscuits, pet food, cherries and infant formula,” says Rich, adding that there are other areas too, including beef jerky.

“As the report identifies, our exports of these top categories in 2010 were greater than the wine industry ($1.03 billion as against $951 million) and most of them are growing faster than all other food and beverage exports. Some 17 of them have already attracted foreign and/or private equity investment, indicating that the market itself has identified they present strong opportunities for growth.”

The categories of processed goods are already having an impact. “But what is most exciting is that Coriolis predicts that if they all acheived their potential we would be looking at exports worth between $4.3 billion and $6.1 billion – approximately $4.9 billion additional.”

To achieve the Government’s goal of increasing exports by 40 percent by 2025, each of these categories needs to continue to grow, says Rich. “This MBIE report will play a critical role in informing this plan.”

An Investor’s Guide to Emerging Growth Opportunities in New Zealand Food and Beverage Exports can be read online at the www.foodandbeverage.govt.nz website, where you can also download a pdf copy.

 

New venison plant for Alliance Smithfield

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Alliance Group’s $8.6 million new venison plant at its Smithfield site, near Timaru, is now operating at full capacity.

New Zealand’s leading meat processor and exporter is processing up to 420 carcases a day at the plant, which serves the company’s upper South Island suppliers.

Until now, Smithfield has only processed sheep and lamb, so the venison plant marks a major milestone for Alliance. More than 50 workers are based at the venison plant, which operates most of the year.

Murray Behrent, general manager of livestock says: “Alliance Group has invested in Smithfield as part of its dedication to delivering exceptional product quality and food safety standards. It is also a reflection of our confidence in the region and we have received great support from our suppliers, who are producing the quality livestock that we require.”

“Smithfield is yet another example of Alliance Group’s ongoing investment to ensure we meet the needs of our suppliers,” he adds.

The outlook for venison remains positive and the investment at Smithfield showed the company was focusing on processing a variety of products for global markets, says Behrent.

ViaScan to be installed at Smithfield in the next year

The new venison plant was built to accommodate Alliance’s innovative ViaScan meat scanning technology, which will be installed within the next 12 months at Smithfield, the company says.

ViaScan visually analyses carcases measuring the lean meat, fat and bone, to capture yield performance levels. It has been available since 2003 for analysing sheepmeat, and is already in use at eight Alliance Group plants. The company announced it was first to be extended to its venison suppliers at the Alliance Makarewa in Southland in July this year.

Along with providing suppliers with the opportunity of improving returns, ViaScan also aligns farmers with current market information and helps them with decision-making and the selection of good genetics.

“Exceptional product quality and food safety standards are vital for Alliance Group’s export market,” said Behrent when announcing the move. “We’re targeting high-end consumers with discerning palates who rate meat quality highly when making purchasing decisions and ViaScan helps our suppliers produce the quality livestock that is required.”

ViaScan will also mean suppliers can measure the performance of each individual carcase, particularly when the National Identification and Tracing Scheme (NAIT) is introduced in February 2013 for deer, says Behrent.

Smithfield is one of the three Alliance premises selected by Marks & Spencer to provide chilled New Zealand lamb for its UK retail stores. It is also one of the five first plants to introduce the new Ovine Post-Mortem Inspection system of sheepmeat carcase checks this year.

In 2011, Alliance Group completed a $15 million project to upgrade its Mataura beef plant in Southland.

Meat export revenue down in June quarter, says MPI

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Lamb leads a drop in export meat revenue for the June 2012 quarter, according to the latest figures from the Ministry for Primary Industries (MPI).

The Ministry’s Primary Industries: Production and Trade report for the June 2012 quarter, says that this is mostly because of lower export prices from weaker international demand and a build up in meat stocks in New Zealand, particularly for lamb, which fell by 25.6 percent against the same period a year earlier. Venison also  recorded a fall of 15.1 percent for the quarter and beef and veal -2.9 percent. In total,  meat export revenue for the quarter, was down 14.4 percent to $1.6 billion. Lamb production, however, was up 5.9 percent in the year ended June 2012, with slaughter numbers up 2.4 percent and carcase weights up 2.5 percent on the previous year, says MPI.

“This reflects increased numbers of lambs born in late winter and early spring 2011 and a record average carcase weight of 18.48kg.”

Beef production fell by 1.8 percent in the quarter due to lower slaughter numbers, particularly for cows and heifers, reflecting lower beef cattle inventories at the end of the 2011 season and retentions for an expanding national dairy milking herd.

Offals seem to have had a healthy year with quarterly revenue increasing for ‘other meat’ of 8.5 percent and a year-on-year increase of 10.7 percent, to end June 2012.

Another significant highlight is that China became the number one market for frozen bone-in lamb cuts in the six months to end June, with the European Union now taking second spot, according to MPI. “However, average export prices of lamb sold to China re about half that received in the EU,” the report concedes.

All but one industry grouping experienced a decline in export revenues, the report says. Overall, primary sector revenue for the June quarter was down 5.8 percent, compared with the final quarter in 2011, to $8.8 million. However,  during the year ending June 2012 there was a production-driven revenue increase of 1.3 percent to just over $32 billion, due to favourable climatic conditions, MPI says.

Climate conditions for pasture growth for the year ended June 2012 were the best since 2002, MPI notes, with 51.4 days of soil moisture deficit compared to the 20-year average of 61.6  – resulting in record carcase weights for lambs, heifers and cows and record milk solids per cow.

The full report Primary Industries: Production and Trade is available for download at the MPI website (search under Publications).

 

 

 

 

Ministry for Primary Industries’ Strategy 2030

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The Ministry for Primary Industries (MPI) has set itself an ambitious strategy to 2030 with the subtitle ‘Growing and protecting New Zealand,’ writes Allan Barber.

In its introduction, the Ministry asks ‘Why this strategy?’ which it answers by saying a re-balancing of the economy towards more productive sources of growth is required and New Zealand must trade itself to greater growth and prosperity.

When one considers that 71 cents in every dollar of merchandise export earnings come from the primary sector, there are no prizes for guessing where most of this is expected to come from. The Government’s strategic growth agenda contains the goal of increasing the ratio of exports to GDP from 30 percent to 40 percent of GDP by 2025, so clearly agriculture will be expected to generate the majority of this increase.

MPI, which now incorporates the functions of MAF, as well as the Ministry of Fisheries and New Zealand Food Safety Authority, has a major role and responsibility for helping to achieve these goals. Having always believed that government agencies must provide the framework and environment within which business has to perform and achieve, it’s expecting too much of MPI and its strategy, if we believe that this will be easy.

Strategy 2030 contains two points of focus: first to ‘maximise export opportunities and improve sector productivity’ and second to ‘increase sustainable resource use, and protect from biological risk.’

Key strategies to achieve these are:

  • Partnering with the primary sectors to identify and seize opportunities for improved productivity and market returns;
  • Removing unnecessary barriers to trade and increasing our use of international standards to enhance value;
  • Encouraging and co-investing in industry innovation and adoption;
  • Identifying and managing risks to New Zealand’s natural resources;
  • Partnering innovative approaches to environmental challenges; and
  • Better understanding the challenges to sustainable use of New Zealand’s natural resources.

The Ministry’s approach will concentrate on enabling and partnering by cooperating, facilitating, providing information and tools, using a whole-of-government approach across the primary sector and connecting primary sectors with one another. A key aspect of this is to engage with Maori which MPI sees as a core obligation.

Before jumping to the conclusion that this obligation is yet another example of political correctness, which is tempting, one must realise that Maoridom has $10.6 billion invested in primary sector assets including 1.5 million hectares of land of which MPI says 80 percent is underutilised. This degree of underperformance certainly needs to be improved and will produce economic returns for both Maori and the country as a whole.

MPI’s structure to deliver its strategy consists of five branches across the whole operation: Policy, Standards, Verification and systems, Compliance and response, and Resource management and programmes. These five branches encapsulate the total range of activities which the Ministry undertakes. The ones with the highest profile are food safety, animal welfare and biosecurity, but these are just the tip of the iceberg.

MPI has responsibility for literally everything and everybody leaving and entering the country. It negotiates standards with the regulatory authorities of our trading partners; it establishes the systems and maintains surveillance to ensure compliance with these standards. It also develops and implements policies across the whole gamut of New Zealand’s agriculture, horticulture and aquaculture sectors.

It is staggering to reflect that in 1987 David Lange saw agriculture as a sunset industry with New Zealand’s future lying in becoming the Switzerland of the South Pacific.

Now more than ever, the primary sector is the engine of our economic growth. MPI’s core responsibilities of setting and applying systems and standards for food safety, animal welfare and biosecurity, while ensuring effective response to pest incursions and non-compliance, are absolutely fundamental to our future place in the world.

The Ministry has an enormous responsibility for ensuring the protection and security of our whole primary sector which is a critical part of our economic growth.

Provided it doesn’t lose its focus on the clearly defined essential outcomes listed in its strategy, this is how it will make its major contribution towards ensuring New Zealand’s future prosperity.

Allan is an agribusiness commentator with particular interest in the meat industry and has his own blog Barber’s Meaty Issues. This article also appears at interest.co.nz.

Year of significant contrast, says MIA

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For the New Zealand red meat sector, the year to June 2012 has been one of significant contrast, given the good prices for many products that were seen early in the financial year, then the steady drop in market prices, particularly for lamb, over the middle six months, says the Meat Industry Association (MIA), in its annual report for the year.

In the foreword to the report, MIA chairman Bill Falconer and chief executive Tim Ritchie note that this volatility, and a further decline in the volume of sheepmeat exports of nearly 27,000 tonnes, has meant the value of the ‘core’ industry exports has reduced this year to just over $6 billion, some $200 million less than for the year ended June 2011.

Highlights during the year included work to strengthen the relationships with the new Ministry for Primary Industries, implementation of the Post-Mortem Inspection reform and the development of a Red Meat Regulatory Strategy.

Halal has been another area of significant MIA activity, with the ongoing implementation of the Halal Notice, while the Ovine Automation Consortium progressed a number of projects, following last year’s commercialisation of the brisket cutter and auto-evisceration robotic systems.

Other research and development projects were progressed through the Meat Research Fund and the Industry Initiatives Fund, ranging from projects measuring energy efficiency in processing plants, through to research into extending the shelf-life of chilled meat – which is of significant interest to the industry given the ongoing volatility and extension of transit times in shipping services.

The long-term forecasts are for meat demand to grow, particularly in Asia, the foreword says. The volatility experienced during the year reinforced the need to continue to implement the recommendations of the Red Meat Sector Strategy “to ensure that we have a strong, sustainable sector that will allow us to be well place to continue to meet the growing long-term demand for high quality, safe protein.”

This article appeared in Food NZ magazine (October/November 2012).

Boot camp stimulates insights

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The outcome of the Boot Camp, which was held two weeks ago at Stanford University, has not – for obvious reasons – been widely trumpeted, writes industry commentator Allan Barber.

 

After all, the objective was never to produce yet another sector strategy, long on analysis of the problem and short on achievable actions to produce a state of nirvana.

Bill Falconer, chairman of the Meat Industry Association, was chosen as the spokesperson for the Boot Camp because he did not represent a single company, but an industry body. The senior executives who attended did not see the merit of or justification for purporting to speak on behalf of their peers from a wide range of rural sector businesses. Therefore, Falconer was the obvious person to speak on their behalf.

The Boot Camp’s objectives, simply stated, were seen as:

  1. To allow the attendees to learn from the professors and to visit US companies in different industries, which would enable them to see how to become consumer driven.
  2. To take six days out of day -to-day business and examine their business from a different perspective.
  3. To see how or whether individual companies could collaborate to their mutual advantage.

Falconer told me that is was one of the most stimulating and encouraging gatherings he had attended, with 20 CEOs and top managers from across the agricultural sector learning from six outstanding marketing professors how to lift their game for the benefit of their companies, industry sectors and agribusiness as a whole.

The conclusions from the Boot Camp can be looked at against the backdrop of the Government’s growth agenda to double exports or otherwise expressed as lifting exports from 30 percent to 40 percent of GDP by 2025.

The visits to companies near Stanford were immensely helpful in gaining an understanding of how the export target might be achieved. The first important conclusion is that there is no point in increasing production on-farm, or in any other environment for that matter, unless you can sell it.

In order to start working out how to sell the extra production, an understanding of consumer demand is necessary, becoming market- not production-driven and planning how to lift performance accordingly. A major insight was the scale of social media used by all the companies visited, a country mile ahead of any New Zealand company, including Icebreaker, which is seen as a leader in the New Zealand context.

I suspect, although Bill Falconer didn’t say so, that tangible results from the Boot Camp will of necessity be slow to eventuate. Nor is it likely that companies will feel the need to make a lot of noise about any specific programmes they develop, either in collaboration or on their own, until there is something concrete to report.

However, if the Boot Camp has achieved a change in attitude about the nature of the task and provided a blueprint of how to go about lifting sales and marketing performance, this will prove to be the best outcome. There has been too much navel-gazing analysis of the size of the problem and the same old strategies to solve it, without any real change in behaviour.

Ideally, agribusiness needs a Messiah to preach the new marketing gospel until the sector as a whole becomes customer- or consumer-driven.

Hickson buys Welsh meat plant

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A meat processing plant in Wales is under new ownership. Progressive Meats’ Craig Hickson and his wife have just bought Cig Calon Cymru (CCC), a meat processor close to Llanelli in South Wales.

CCC is a multi-species plant, primarily processing Welsh Black and cattle and also lambs, employing over 30 staff. The British Farmers Guardian newspaper reports that the deal includes an all new management team, as well as an export partnership for beef. New Zealander Hugh Brown is to take the role of general manager and there is a newly created livestock supply manager.

New Zealand Federated Farmers has supported the move and says that while a recently released PricewaterhouseCoopers (PwC) report for New Zealand Trade & Enterprise (NZTE) points towards growing New Zealand agribusiness in newer markets such as South America and China, Hickson has proven there is opportunity left in New Zealand’s traditional markets.

“While we must maximise the potential of New Zealand’s land resource, there is an inescapable logic about taking our intellectual property and skills globally,” says Jeanette Maxwell, Federated Farmers meat and fibre chairperson.

“If we take a leaf from the automotive industry, Toyota now makes most of its vehicles outside Japan. The challenge is in having capital markets which can help us seize these opportunities. We also need to be mindful there is still a lot of life left in our ‘old’ markets.”

Maxwell says this is an example of a progressive New Zealand meat company investing offshore. “There are others and they are not intended to simply be a meatpacker for our red meat, but to work in-market with local farmers to build their businesses and the overall market.

Getting inside markets, is what PwC/NZTE is calling for, she says.  “It is not dissimilar to how Fonterra works globally, or how Brazilian meat processors have become strong through global logistics and supply chain management.

“As New Zealand is a leading global exporter of red meat, we start to match that by becoming a leading global processor and marketer as well.”

The move maximises opportunities, markets and above all, returns, Maxwell believes.

In addition to owning Progressive Meats, Craig Hickson, who was named Federated Farmers’ 2012 Agribusiness Person of the Year in July, is also a B+LNZ Ltd director and a major shareholder of sheepmeat processor and exporter Ovation New Zealand. He and his wife also own a 1,500 hectare sheep, beef and venison farm.

Overseas investment bill defeated

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The Greens’ private members bill restricting, in other words banning, all sales of farmland of more than five hectares to an overseas investor was defeated last week by two votes, writes Allan Barber in his latest blog.

In the article which has also appeared at interest.co.nz, he argues that the Labour Party’s new position,”in support of the Green’s xenophobic attempt” suggests the party has moved light years away from its position of five years ago, when it issued the ’2007 Export Year’, “which says nothing significantly different” from the recently released progress report ‘Building Exports’, part of the current National Government’s Growth Agenda.

“Without overseas investment and shackled by our high debt level, New Zealand cannot possibly aspire to the optimistic export goals of successive Governments from both sides of the political divide,” he says.

He talks to Federated Farmers chair Bruce Wills and compares the NZ situation to Australia’s and concludes that New Zealand can’t afford any reduction in the relative contribution made in 2011 by meat, dairy, wool and horticulture (43 percent of export goods or 34 percent of goods and services), whether or not any progress is made towards the Government’s target.

“Changes of the kind represented to Parliament last week would present a massive head wind.”

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