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Is this the year for a sheepmeat strategy, asks Barber?

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Allan BarberIs this the year for a sheepmeat strategy, asks meat industry commentator Allan Barber in his latest column. The key question for the meat industry this year is whether anybody will make any money, he writes.

After last season when farmers enjoyed unprecedented procurement prices and the meat companies lost millions of dollars as a result, prices have headed south and look set to remain there for the foreseeable future.

Sheepmeat is the product most under threat with the traditional markets all showing serious signs of indigestion. As an example, a US importer has been reported as saying he has a year’s worth of inventory and can’t buy any more and neither is anyone else. This signals a major problem for middle cuts like lamb racks, while Europe isn’t exactly rushing to buy any product either.

This explains the amount of cheap sheepmeat available on our domestic market, although unfortunately local consumers have been turned off buying lamb as a standard part of their diet by last year’s high prices – no different from the rest of the world; and expecting New Zealand’s minute population to absorb any significant part of the oversupply is a bit like expecting Fiji to win the World Cup or the Black Caps to win the series in South Africa for that matter.

Beef may resist the worst of the price downturn because US demand remains steady against a backdrop of falling domestic cow numbers and consequently an increased share for imported beef. Asian demand will also remain firm, while New Zealand exporters may be able to pick up some of Australia’s market share, as Australian supply to the USA is anticipated to take the lion’s share of the increase there.

But even beef will continue to struggle under the impact of our dollar which is set obstinately at about 84 US cents with the greenback unlikely to strengthen at all, unless Congress can agree on a fiscal solution to the enormous American debt problem. In spite of averting the fall over the fiscal cliff, the US really hasn’t solved its long-term problem, merely postponed a decision.

The main difficulty for sheepmeat is the amount of inventory held by wholesalers and exporters which is waiting to be sold into a market which doesn’t need it and, even if it did, can’t afford to pay a price for it which will compensate for our exchange rate sitting at 52p and 0.63 Euro. This inventory problem will only be exacerbated by another season’s production which will hit its peak in less than three months.

If my pessimistic assessment is even only half correct, 2013 bears all the signs of an extremely difficult season for all participants in the sector. MPI’s forecast for farm incomes, down on last year, is still reasonably positive at least in historical terms, but it must come under pressure from any further price drops or cost increases. There is most unlikely to be any spare cash around.

After the beating taken last season by the processors, shown factually in the annual accounts of Silver Fern Farms, Alliance and Blue Sky Meats, and by implication in the results of the others, all the meat companies will be under pressure to get back into the black. The only way they can achieve this is to reduce procurement costs, increase operational efficiencies and sell inventory into the market, preferably with a profit margin on what it cost them.

This last one will be by far the hardest. There is already plenty of evidence of product being offered at very competitive, or silly, prices in spite of Keith Cooper’s claim before Christmas that working capital tied up in inventory is ‘good’ debt because it restrains companies from dumping product. Now if that isn’t a case of making a virtue out of necessity, I don’t know what is.

Logically if there is an inventory problem, it makes sense to quit it at the going rate rather than waiting for the market to recover by which time there will be more inventory in the freezer tying up more working capital.

The meat industry is becoming increasingly a division between sheep (very hard to make a consistent profit) and beef (quite or extremely profitable, mostly because of the livestock sourced from the dairy industry). Those companies which specialise in beef from dairy regions, notably Greenlea and Universal, appear to be very profitable without interference from the volatility of sheepmeat pricing.

Alliance has traditionally been the outstanding performer among the processors with a commitment to the sheep industry. Silver Fern Farms has reinvented itself as a company with a significant beef business which has reduced its vulnerability. But as last season’s results showed, the sheepmeat business placed serious pressure on their balance sheets which will inevitably continue throughout this year.

This may be the year when some serious strategic thinking is applied to finding a viable industry model for sheepmeat alone, instead of trying to find a single solution for the meat industry as a whole.

This column has appeared in NZ Farmers Weekly and interest.co.nz and is reproduced here with permission. Allan also has his own blog Barber’s Meaty Issues.

 

Meat industry lacks leadership according to Cooke

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The National Meat Workers Union’s General Secretary Grahame Cooke stated last Monday the large loss published by Alliance Group would be the first of several for the 2012 year. His point is fairly accurate, confirmed by Silver Fern Farms’ loss announced on Tuesday, writes industry commentator Allan Barber.

Of the other companies ANZCO and Blue Sky Meats will file their results with the Companies Office at the end of March. AFFCO is now a wholly owned subsidiary of Talley’s and doesn’t disclose its results, although the Meat Workers Union says (optimistically) these will be horrendous because of the lock out earlier this year. AFFCO’s results may not be as bad as all that because of the lack of a peak kill.

Cooke’s next point was the losses would inevitably lead to more industry rationalisation; this in turn would cause job losses for the meat workers who have already been affected by several plant closures in recent years. Job and earnings security suffered from fewer stock numbers and shorter season with workers being paid piece rates for shorter shifts; also higher average weights mean better productivity which is true for lambs, but not cattle.

His final point was about the lack of industry leadership in spite of the fact there are a number of good individual companies, all competing vigorously with each other. Cooke said the meat industry has not changed in the last fifty years with poor marketing and plant closures quickly followed by the addition of more capacity. He described the industry graphically as behaving like a cow with its head chopped off.

A look at the Union’s website provides more information on this topic: plant capacity has increased over the past decade with new plants, rebuilds and upgrades at nine plants across the country as well as capacity increases at several more. The Union believes the Government must initiate a ‘meat summit’ to address this.

So the questions are whether Cooke is correct or the industry is behaving in a perfectly rational manner.

My first reaction is the Government will never initiate a summit, almost certainly just another talkfest, because it realises the industry has a functioning commercial model. It competes in a global market and government should never interfere with privately owned businesses, provided they comply with the law. The meat industry has its own industry body, the MIA, which deals with all sorts of industry issues, but not those which impinge on competition between its members.

In addition, land use changes dictated by relative sector profitability will continue to occur regardless. The government would not be wise to get involved in picking winners or hobbling one sector’s ability to adjust its processing facilities.

My next reaction is meat processors and exporters are not the whole industry. There is a value chain which starts behind the farm gate and finishes in restaurants or consumers’ homes. The Red Meat Sector Strategy, FarmIQ and other company based initiatives attempt to define what can be done to join links in the value chain so they contribute to higher, more consistent returns. But it’s up to the farmers to produce to these specifications.

Meat exporters have done a great job over recent years to convert yesterday’s freezing industry into a sophisticated red meat member of the food industry, while also expanding into high value medical and other non-food product areas. More can always be done, but the industry has moved light years from the age of subsidies.

However, this process of modernisation has of necessity been achieved at a cost to overall jobs and terms of employment. The older plants were inefficient and built to service a different industry structure from a previous age. The period following deregulation and more particularly the removal of subsidies saw many farmers in serious financial straits, so their only option was to change farming practice or land use or sell. An unavoidable, even desirable, outcome was a big decline in sheep and prime beef numbers, offset to some extent by the growth in the dairy industry and the US manufacturing beef market.

Owen Poole made the point to me the losses are a sheepmeat problem and Alliance has responded by making the appropriate plant decisions, such as closure of Mataura sheepmeat processing, doubling Mataura’s beef capacity, increased venison processing at Smithfield and rendering at Lorneville. Keith Cooper also confirmed his satisfaction with SFF’s footprint in relation to livestock volumes, having already taken some tough capacity decisions.

This emphasises the regular requirement for new plant configurations to meet the demands of the market place and consequently the workforce must adapt as well. My experience tells me the meat industry does a pretty good job of responding to changes in market conditions, while generally trying to keep its workforce employed. But there is no future in keeping inefficient plants running to protect workers’ jobs, because these will disappear sooner rather than later.

Equally there are no prizes for leaving customer orders unsupplied when competitors are still prepared to process livestock. I certainly wouldn’t fancy the chances of the industry leader who sets an example by refusing to pay the money and has to tell Tesco or Marks and Spencer his company can’t supply because the stock costs too much this week.

Leadership is not as simple as it appears.

The item has appeared in NZ Farmers Weekly and at Allan Barber’s blog Barber’s Meaty Issues.

Season just ended could produce messy results, says Barber

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The season just ended could produce messy results, according to meat industry commentator Allan Barber.

The two largest processors and exporters, Silver Fern Farms and Alliance, have captured the headlines in the last couple of weeks.

Hot on the heels of its announced intention to close its sheepmeat chain at Mataura, Alliance has come out with an offer to suppliers of $20 in November per lamb contracted before the end of October.

From the other cooperative camp Keith Cooper, chief executive of Silver Fern Farms, last week sent an email out to suppliers which highlighted the disappointing financial result for the year ended 30 September because of the exchange rate and declining sheepmeat values in January and February not being reflected in procurement prices.

The final results will be declared in about two months when the market will be able to see just how disappointing the performance of the two companies actually was. Rumours of multi-million dollar losses have been prevalent, but rumour is just what they are until we see the actual figures. There is no doubt the problem has been almost entirely with sheepmeat in spite of the exchange rate, because exporters have been far more successful at reining in beef procurement costs.

It doesn’t take an Einstein to work out that the shortage of lambs for Mataura and the procurement competition are just two aspects of the same problem. The lowest national lamb kill for 51 years at 18.6 million, 15 percent down on the five year average will have made it very difficult for any company to get sufficient capacity utilisation to come close to making a profit. With Alliance’s largest sheep plant outside Invercargill, Mataura just over 50 km up the road was always under threat from declining volumes.

Blue Sky Meats, which balances in March, presaged the 2011/12 season’s problems in its declared annual result – a pre-tax loss of $604,000 and no dividend paid. The company termed this the most disappointing result in its history and drew attention to the excessive prices paid for stock through the turn of the year, both because of the high dollar and the drought in Southland.

It will be interesting to see how successful Alliance will be in securing committed lambs from suppliers stimulated by the $20 cash advance. Keith Cooper’s reaction was to say Silver Fern Farms had tried it six years ago with no success because some suppliers were affronted by the implication they were short of cash and didn’t want to close out their slaughter options. He prefers to rely on the company’s suite of supply plans rather than to repeat the cash in advance offer.

In his email to suppliers, Cooper sounds quite bullish about the new season’s prospects with a ‘fully configured operating platform’ and some exciting new marketing initiatives, even being bold enough to state that realistic livestock values are being established. If that is the case, it will either be because there’s enough livestock around to satisfy all processors or he is confident Silver Fern Farm’s overhead structure is competitive enough to guarantee filling their requirements.

Either way that is a big call in spite of the gains Silver Fern Farms has made in recent years, notably the closure of the Belfast sheep chain, improvements to its Finegand sheep processing and the rebuild of Te Aroha in the heart of the dairy farming Waikato/Bay of Plenty region. There are expected to be another 1.5 million lambs, but not enough to change processing dynamics much, while the market is another factor.

The meat industry is unique in that it has to compete at both ends of its supply chain. While livestock procurement has the most obvious impact on company profitability, demand from the market is also critical. Last season’s disappointments and losses have been as much about carrying too much inventory which the market couldn’t digest as the cost of the livestock to produce it.

When companies fail to manage both ends of the chain properly, things get messy. Just how messy they were last season will become clearer at the beginning of December when Alliance and Silver Fern Farms publish their results.

Chuffed to be recognised by peers

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Lamb processor Craig Hickson was “chuffed” when he learned he was to be awarded the 2012 Allflex Federated Farmers Agribusiness Person of the Year in July. Adding a new Welsh meat plant to his business portfolio this year too, makes it one to remember in his business journey.

“It’s very pleasing to be recognised by your peers,” admits the managing director of Progressive Meats.

The astute Hawke’s Bay businessman’s speciality has lain in seeking solutions for plant processes that meet modern demands and also for challenging convention. Over most of the last 40 years (up to 2007) he has been in operation, the straight speaking Hickson has deliberately steered away from direct involvement in exporting leaving others to concentrate on that while he has focused on the niche of contract processing product for exporters.

Recognised as one of the meat industry’s leaders, he holds a seat on the Meat Industry Association (MIA) council and represents industry on the boards of Beef+Lamb NZ Ltd and the New Zealand Meat Board and an assorted array of other directorships.

Born in Canada to Kiwi parents, the young Craig Hickson was moved to Waipukurau when he was three months and later, at age seven, to Havelock North. His schooling was completed at Hastings Boys High, with vacations spent working at the Hawke’s Bay Farmers Meat Company Whakatu works, before he progressed on a HBMC scholarship to Massey University. There, he graduated with a B Tech in food technology, specialising in the engineering side – which has stood him in good stead through several new plants and plant renovations since. Later, he added a BA in economics and marketing to his list of accomplishments.

However, at that stage, pure food technology was not for the young red-headed Hawke’s Bay lad. In 1975, he found himself a job at the Meat Producers Board as product development officer, before leaving in 1980 to develop his own business – a small lamb packing plant in Hastings, Progressive Meats, which opened with his wife in October 1981.

In order to satisfy customer demand for contract services over the years, the Hicksons were involved with a few others in the ownership, design, planning, contruction and operation of Lamb Packers Feilding Ltd and Progressive Gisborne Ltd – and also with Lean Meats Oamaru through a minority shareholding in Lean Meats Ltd.

Having sold their 50 percent share in Feilding and Gisborne to Bernard Matthews NZ Ltd (BM) in 2005, Hickson was part of a syndicate that bought 100 percent back again in 2007 – the same slaughter and processing plant in Gisborne, and slaughter plant in Feilding plus a further processing plant in Waipukurau – when BM decided to withdraw from New Zealand to concentrate on its UK operations.

New meat plant in Wales

Matching supply to demand is also the reason for the purchase in April this year of a small Welsh meat processing plant Cig Calon Cymru (pronounced kig kalon – like talon – kumru, roughly translated as ‘Meat from the heart of Wales’), at Crosshands, near Lllanelli in South Wales. The plant is principally a beef processor, with a small lamb line.

Hickson explained that they had been looking for a suitable processing opportunity in the area to supply lamb year round to British consumers – the British and New Zealand lamb production is largely complementary for chilled. This enables New Zealand lamb to be supplied during the December to May period, when Welsh lamb is in short-supply and then Welsh lamb during the June to November period, when New Zealand lamb is in shorter supply benefiting both sets of producers. It will go into the same packaging with the country of origin clearly labelled.

The name of the company will remain as is and the plant will continue to process beef, but the branding for CCC product is yet to be determined. The management team will include New Zealander Jim Goodall who has the role of general manager. According to Hickson, plant staff are pleased that the company will have a new lease of life, while the local farmers are “reserving their judgement”.

Federated Farmers here have welcomed the initiative as it sees the move is an example of the vertical integration called for in several recent reports and shows there is life in New Zealand’s traditional markets. However, it is not novel, maintains Hickson pointing to Silver Fern Farms’ previous ownership of Brooks of Norwich, which enabled it to process frozen cuts to retailers’ exacting specification in-market, and other New Zealand companies, such as Alliance, Affco and Anzco, which have had in-market representation for many years and, in some instances, association with local processors.

He’s pleased there’s a ‘family’ connection too. The Hicksons own a 1,500ha farm in Hawke’s Bay and the farm manager’s wife, Denise, is Welsh, hailing from St Clairs which is near where the new plant is situated.

Slow product development

Hickson has observed very slow progress of new meat product development in terms of ready-to-eat products over the past four decades since his graduation.

“The major development area has been in the form of natural cuts and portion-size,” he says.

One fundamental reason he gives for the slow development of lamb ready meals is that lamb is a relatively high priced meat as a competing ingredient. Another is the fact that the nature of lamb fat means that it solidifies at a higher temperature than beef or pork making it tricky to work with. It is best served hot or cold, not warm.

One famous product victim of the rising price of lamb was the Bernard Matthews lamb roast, a frozen product that did very well in Britain. The concept was based on the company’s technology and marketing machinery for its famous turkey roast and was so successful it led to a plant being built here in Waipukurau to manufacture the lamb version.

The product did very well until the price of lamb increased beyond what this market segment would support, he explained, and  volumes diminished to extinction. By then, BM had developed lines in chilled and frozen portion-controlled and weight-ranged lamb products for its range.

The new McDonald’s lamb burger, which has been trumpeted about recently, is one of only two examples of a commercial lamb ‘fast food’ item. The other being a doner kebab made from lamb flaps.

Contribution to processes

Hickson believes his most valuable contribution to industry has been to plant processes. Progressive Meats was at the forefront of changes to shiftwork, which though it had already been in place in the ‘follow on departments’ in plants, it was not utilised in slaughter and boning rooms. He gained union agreement in 1986, following a five week strike, just over a year before implementation in 1988.

“Shiftwork enabled small plants to be competitive, through the improved utilisation of capital,” he says.

It was its work on relationships with farmers that enabled Progressive to be the first company in 1987 to offer forward commitment arrangements for lamb supply. “At the time, other industry participants thought forward commitments were not viable and would fail,” Hickson said. But they didn’t.

Progressive was also one of the first companies to move away from the Meat Board’s grading system, which had been designed for carcase specifications, and adapt it for its own customers’ specifications for cuts.

“We talked to our farmers and encouraged them through payments to produce lambs to specification.”

After legislation changed to ban smoking in the workplace, he embarked on a lengthy court fight to establish whether a purpose-built, negatively-pressured smoking room next to the cafeteria at Progressive’s Hastings plant was outside the ‘workplace’. The challenge was lost, but had a silver lining.

“The legal wording was ambiguous and I thought, had the room been deemed not  a workplace workers would not need to change clothes to go outside for a smoke, saving time, and their smoke wouldn’t disrupt other non-smoking employees.”

In the end, the court decided the room was ‘a workplace’ and workers did need to smoke outside the building. As Hickson himself is not a smoker, in fact he says he is “vitriocally opposed”, his support surprised his employees.

“Industrial relations have never been so good as just after that court decision,” he says, adding that the union financially contributed towards the defence of the case.

Looking to the future

Looking to the future, he commented that the Red Meat Sector Strategy (RMSS) is essentially a collation and synthesis of the views of industry participants.

“It didn’t deliver anything new but it is in a coherent form and advocates the development of future business along the lines of what, in many cases, is already going on,” he says.

However, ‘competition to buy’, tends to restrict the rate of progress to that of other competing companies in the field. While there is a high degree of consensus when interviewing participants one-on-one, it is a different matter when actions are observed in the cold commercial, competitive reality, he believes.

He sees the major challenge for the industry is for pastoral sheep, beef and deer farming to be a competitive land use option (at the margin) compared  to dairying, forestry, viticulture and horticulture, among other uses.

“In 40 years, I’ve seen a dramatic change in the Hawke’s Bay Heretaunga plains, which was once prime finishing land for livestock and is now covered in apples, crops grapes, and other viticulture.”

Lifting prices is an obvious target, but is constrained by the fact that lamb is already a relatively high priced meat, he believes.

“Reduction in wastage getting the product to consumers is another target as is endeavouring to negotiate a larger share of what the consumer pays with supermarkets and food service people generally taking between 30 to 50 percent of what the consumer pays.”

“Sheep are a dual product animal and we neglect wool at our peril,” he says. ”We need to be actively seeking new applications to lift demand and hence returns, particularly for the mid-micron and strong wool,that are traditionally used in carpet making. Wool hasn’t kept pace with lambing percentage increases, or inflation and if we could arrest the decline, and reverse the trend, sheep farming will be more profitable and grow.”

During his spare time, hobbies include managing his 60 hectare farm around he and his wife’s home in Haumoana, where he keeps deer near to the house, “nice to look at and easy to keep.” He has a love of classic cars and still owns the first one he bought when he was 19, a 1954 MG TF. He plays tennis and cricket and enjoys sailing on Lake Taupo.

When asked what was his most proud moment over his career to date, Hickson paused to reflect and said he had difficulty picking one moment as they blend into each other.

“I’ve never felt as though I’ve climbed a mountain, I’ve always been on a journey.”

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Craig Hickson

  • 1970 to 1973 – B Tech (Food), Massey University.
  • 1973 – Management trainee at Hawke’s Bay Farmers Meat Company, Whakatu.
  • 1975 – Joined Meat Producers Board staff as product development officer. Completed BA in Economics and Marketing Victoria University.
  • 1981 – Hicksons start small meat packing house Progressive Meats.
  • 1982 – Designs , builds and commissions small venison plant alongside Progressive Meats for ‘start up’ local farmer company, East Coast Venison.
  • 1987 – Plan and design venison plant in Feilding for East Coast Venison.
  • 1987 – Design, build and commision lamb slaughter at Progressive Hastings.
  • 1990 – Takes a minority interest in Lean Meats Ltd.
  • 1993 – Takes a minority interest in Te Kuiti Meats Ltd.
  • 1994 – Buys venison plant in Hastings and, with partner John Signal, the venison plant in Feilding from Venison New Zealand (formerly East Coast Venison).
  • 1995 – Builds Lamb Packers Feilding Ltd.
  • 1998 – Builds Progressive Gisborne Ltd.
  • 1999 – Builds replacement slaughter plant at Hastings (original only 13 years old).
  • 2003 – A principal in setting up Progressive Leathers Ltd at Whakatu.
  • 2005 – Sells Feilding and Gisborne Lamb interests to Bernard Matthews.
  • 2006 – Takes a majority interest in Te Kuiti Meats Ltd.
  • 2007 – Syndicate, including Hickson, purchases Bernard Matthews NZ Ltd’s lamb-processing and exporting operations in New Zealand and renames it Ovation New Zealand Ltd (plants at Gisborne, Waipukurau and Feilding).
  • 2012 – Allflex Federated Farmers Agribusiness Person of the Year.
  • 2012 – Hicksons purchase Welsh meat processor Cig Calon Cymru.

Current directorships: Progressive Meats Ltd, Ovation New Zealand Ltd, Lean Meats Ltd,Te Kuiti Meats Ltd, Progressive Leathers Ltd, MIA Council, Beef + Lamb NZ Ltd, Meat Board Ltd, Ovita Ltd. The Hicksons also farm sheep, beef and venison on 1,500 hectares in the Maraetotara/Elsthorpe district in East Coast Hawke’s Bay.

An abridged version of this article appeared in Food New Zealand magazine (October/November 2012).

 

The Kiwi dollar will rise further against the greenback

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Bank of New Zealand economist Tony Alexander wrote an excellent piece this week and made some interesting observations that he says are important for exporters to understand as they struggle with a high New Zealand dollar. He says the Kiwi dollar is going to rise further against the greenback. He explains his thinking in a cutout from the BNZ’s Weekly Overview.

Global meat prices to surge

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Global meat prices could face a surge next year, bringing mixed blessings for New Zealand’s meat exporters and producers, and potentially bad news for consumers around the world.

The main concern is the severe drought in the US – the worst for half a century – which has caused US wheat, corn and soyabean crops to fail. At the same time, adverse weather conditions are also said to be affecting grain harvests in Russia, Ukraine and Kazakhstan. Responding to the shortages, grain prices have surged.

This is good news for New Zealand’s arable farmers – recent figures released by the Ministry of Primary Industries shows that arable farm profit has risen by 136 percent on the previous poor season and forward contract prices for wheat and barley have been going up in recent months because of the US drought.

However, the higher grain prices are impacting on feed prices and will, ultimately, force up downstream prices of foods dependent on grain, including grain-fed meats, in particular beef, poultry and pork. This is the bad news for consumers around the world, with huge numbers potentially finding some foods out of their reach financially, and causing concern for governments and non-governmental organisations (NGOs).

Speaking at the Red Meat Sector Conference in July, GIRA’s Richard Brown had pointed to the fact that global feed prices were at that point already trending higher “with almost the opposite weather conditions to 2011 in the Northern Hemisphere”. He said that this was leading to producer caution around the world.

Now, as supplies dwindle further, US farmers are killing off stock they cannot feed in drought ravaged areas – according to the United States Department of Agriculture (USDA)’s US Drought Monitor, 63 percent of the nation’s hay acreage and 72 percent of the cattle acreage is in areas experiencing drought.

US beef is being bought, frozen and stored for later use. meatpoultry.com reports that the US Defense Logistics Agency (DLA) is procuring US$100 million worth of supplies of meat poultry and fish, to provide drought relief for the US agriculture industry. These supplies will be stored and distributed to American troops around the world, including Afghanistan.

B+LNZ Ltd chairman Mike Petersen reports that US corn yields are being revised down daily and, while there is good confidence in the future of beef, returns generally are going to be dampened in the short-term.

“Reports are predicting an increased flow of US beef on the markets through November and December as a result, but for prices to increase strongly by January with dwindling supplies and the effects of sharply increased grain prices for feedlots,” he says.

Grass-fed beef will not face higher grain input costs

The good news for New Zealand meat exporters is that, with this country’s grass-fed production system, the sector will not face these higher grain input costs, says Meat Industry Association (MIA) chief executive Tim Ritchie.

“All other things being equal, the predicted – grain induced – rising tide of prices later this year should benefit New Zealand at least in the short-term.”

Of more concern to Ritchie and meat exporters are the structural changes to the global meat system, as in recent years China has turned to become a net importer of grain, as opposed to a net exporter.

Ultimately though, it’s New Zealand meat consumers in markets overseas, such as those facing economic pressure in Europe and where demand is expanding such as in Asia, who will make or break the fortunes of the industry.

“It all comes down to the person on the street being more careful with their discretionary dollar,” he says. That, in turn, reinforces the need for the meat industry to continue to develop market-driven products that fit with the needs of the targeted consumer.

“The ‘new norm’ for meat price prediction is ‘volatility’, which makes short-term predictions of price and demand dangerous,” says Ritchie.

“However, the long-term forecast is for meat demand to grow, particularly in Asia.”

Trading with Russia

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Exporters trading with Russia will be focusing on Vladivostok as trade talks take place there next week.

A delegation of business people is participating in the Asia-Pacific Economic Co-operation (APEC) Chief Executive Summit and related meetings in Vladivostock, Russia, during the week of 3 September, according to the NZ International Business Forum (NZIBF).

“The Vladivostock meeting takes place as Russia takes up its long-awaited and welcome entry into the World Trade Organisation (WTO) and as further progress is made to build the foundations for future growth in the Asia-Pacific region,” says NZIBF executive director Stephen Jacobi.

“New Zealand has a major stake in the future economic success of the Economic APEC region which takes over 70 percent of our exports. Negotiations now underway amongst eleven APEC economies to complete the Trans-Pacific Partnership (TPP) are aimed at eliminating trade barriers, reducing the cost and complexity of doing business and providing a pathway to a future Free Trade Area of the Asia Pacific (FTAAP). New Zealand is also negotiating a free trade agreement with the Customs Union of Russia, Belarus and Kazakhstan.”

Russia’s 2012 chairmanship in APEC is promoting the domestic economy’s organic integration into the system of economic ties in the Asia Pacific Region (APR) in the interests of modernisation- and innovation-driven economic development, primarily in Siberia and the Russian Far East.

The fourth and final meeting this year of the APEC Business Advisory Council (ABAC) will take place in Vladivostock 3-6 September. ABAC members will present their views and recommendations directly to APEC Economic Leaders, including Prime Minister John Key, on 8 September. They will be joined at the APEC CEO Summit 7-8 September by several New Zealand chief executives.

This year’s Summit – under the theme Addressing Challenges. Expanding Possibilities. – will explore how business can contribute to future prosperity in the region through trade liberalisation, safe food and water supply, infrastructure development, the fostering of innovation and new transportation routes.

In the year ending December 2011, Russia was 14th on the list of New Zealand’s top trading partners. The country imported $44 million (fob) worth of New Zealand sheepmeat and about $11 million worth of frozen New Zealand beef.

Input sought on animal welfare proposals

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Meat exporters, processors and producers have an opportunity to give their input, alongside other interested parties, to the Government’s proposed changes to New Zealand’s animal welfare system.

Primary Industries Minister David Carter says the proposals set a strategic direction for animal welfare and improve the way the current Animal Welfare Act 1999 operates.

“Animal welfare matters. It matters because how we treat animals says something important about us as a society. It also matters for New Zealand’s reputation because our trading partners and international consumers rightly expect us to maintain high standards of animal welfare.”

The proposed national strategy, the first of its kind, will canvass the views of stakeholders with animal welfare interests, identify the strengths and weaknesses of the current system and set a vision for New Zealand’s animal welfare system into the future, the Minister says.

“The proposed changes to the Animal Welfare Act will clarify the way it operates and make it easier to enforce.”

Radical change is not proposed, as the suggested values, outcomes and approaches are already implicit in the system, neither is it seeking to lift standards, the Ministry for Primary Industries’ discussion paper says. A key proposal is that codes of welfare, which currently set the standards for animal welfare, are replaced with a combination of regulations and guidelines. Regulations will be directly enforceable in law. Guidelines will provide information and advice but will have no legal effect.

Delivering the strategy will require action from the meat industry in terms of implementing industry schemes to improve welfare; recognising and building stockmanship skills, educating members about best practice and meeting standards, measuring animal welfare performance and engaging with the public and consumers. It also encourages continuing collaboration in setting standards, co-investing in research, contingency planning and the existing joint Government/industry initiative to improve animal welfare compliance.Many of these actions are already in place.

The closing date for submissions is 28 September 2012. Read more about how to make a submission and to read the discussion paper.

New meat inspection programme gets thumbs up

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Successful trials of a new meat inspection programme have resulted in the thumbs up from major overseas regulators, reducing costs for meat exporters, but not at the expense of food safety.

The Ministry for Primary Industries (MPI) has received advice from regulatory authorities in Europe and the United States, two of the industry’s major export destinations, that the proposed new meat inspection programme meets their requirements and can be used for products exported to these markets.

The proposed programme is based on successful trial work (profiled in Food NZ, Dec 2010/Jan 2011) and would allow for fully trained meat company staff to carry out some non-food safety aspects of meat inspections, known in the industry as ‘suitability’ or quality aspects.

Official government inspectors will continue to carry out food safety-related functions.

MPI, the Meat Industry Association (MIA) and AsureQuality have formed a team to develop a plan to implement the new inspection programme. This will require some changes to MPI standards, on which MPI will be consulting.

This article appeared in Food NZ magazine (August/September 2012).