Global meat prices to surge

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.”

Nearly quarter of a billion being invested in red meat

Nearly a quarter of a billion dollars is being invested by the meat industry and the government in projects aimed at adding a potential $3 billion to returns over the next decade.

Ministry for Primary Industries (MPI)’s director-general Wayne McNee took the opportunity at the Red Meat Sector Conference to announce approved funding for the latest Primary Growth Partnership programme, which will enable the production of high-value marbled grass-fed New Zealand beef for premium export and domestic markets.

The initiative will develop marbling in grass-fed beef in the New Zealand beef herd, using Wagyu beef genetics, McNee explained. “MPI will invest in this programme with Brownrigg Agriculture and Firstlight Foods. The PGP is committing $11 million over seven years, for a programme worth a total of $23.7 million.”

Marbling, the distribution of fat through meat, is a primary determinant of quality in table beef in international markets such as Japan, China and the United States. Internationally, such high quality beef is produced mainly from cattle housed in pens and fed grain. ANZCO Foods has been producing a supply of hand-selected steers for Japan, raised on grass but finished on Canterbury grain at the Five Star beef feedlot near Ashburton for over 20 years.

To produce a comparable meat fed using New Zealand grass, the new PGP programme is aiming to develop an integrated value chain for the beef. It will combine high marbling Wagyu sires for the yearly mating of dairy heifers and cows and the development of rearing and grazing systems that will support year-round growth of the cattle.

McNee said the programme aligns well with the Red Meat Sector Strategy.

“The programme will produce unique New Zealand high-value beef for discerning consumers. It will link specialists in dairy farming, cattle breeding, finishing, processing and marketing and deliver market signals effectively right through the value chain,” he said.

David Brownrigg of Brownrigg Agriculture says it will be a significant opportunity for beef and dairy farmers to lift the quality and value of their calves and finished cattle.

“The New Zealand dairy sector represents an under-utilised resource for producing quality beef calves. Brownrigg’s Wagyu crossed with ‘Kiwi’ dairy cows and Angus beef cows will produce outstanding beef and help us lift our game in international markets,” according to Brownrigg.

Gerard Hickey, managing director of Firstlight Foods says a planned marketing programme to selected high-end global consumers will enable beef farmers to build their businesses with confidence.

Minister welcomes announcement

Welcoming the announcement, Minister for Primary Industries David Carter says, “The Government’s total investment so far of more than quarter of a billion dollars in PGP programmes, demonstrates its firm commitment to boosting economic growth through primary sector research and innovation.

“All New Zealanders stand to gain from the partnership because, alongside our internationally prized lamb, our beef sector is pivotal to the success of our economy.”

The announcement lifts the total government-industry PGP spend over the past three years to nearly $600 million. Nearly $86 million of government PGP funding has been allocated to three meat industry projects worth a total of nearly a quarter of a billion dollars to date. These are estimated to potentially put over $3 billion more on the country’s GDP by the mid-2020s.

To date, PGP-supported meat projects include funding of up to $59.5 million over seven years for the $151 million Farm IQ project with partners Silver Fern Farms, PGG Wrightson and Landcorp Farming aimed at creating a demand-driven integrated value chain for red meat. Seven project streams and 18 sub-projects are working to improve the capture and utilisation of both market and farm production information. The information will then support the development of new value-driven genetics and extension work that underpin the programme.

Another $36.6 million PGP project with NZ Merino, including $15.15 million of PGP funding, is looking to develop merino sheep with meat, wool and other products suitable for market demands over the next seven years.

Also in the wings, is a project that has been approved to business plan stage and will potentially to be funded to the tune of $37 million, led and matched by funds from Beef + Lamb NZ Ltd focused on implementing a number on-farm elements of the Red Meat Sector Strategy. Other meat industry projects are also in the pipeline, according to MPI.

The PGP is expected to be fully subscribed by next year, says McNee.

An abridged version of this article appeared in Food NZ magazine (August/September 2012).

Lining up for grass-fed beef in Japan and Korea

 

 

 

 

 

 

 

Chefs in Japan and Korea have been learning more about New Zealand grass-fed beef from award-winning Christchurch chef Darren Wright.

Beef + Lamb New Zealand (B+LNZ)’s market manager for Japan/Korea, John Hundleby says Wright, who has been in the two countries promoting New Zealand beef to a lineup of influential chefs and media, cooked a range of beef dishes at a number of events. His offerings included beef ravioli made from short-ribs, beef tortellini and tenderloin steaks.

“Since Korean and Japanese people are far more familiar with the cooking qualities of grain-fed beef which is more common in the two markets, a highlight at these events is always the demonstration of how to cook a good grass-fed beef steak.”

Japan and Korea are important markets for New Zealand beef farmers. Japan is New Zealand’s number two beef export market by value, worth NZ$230.7million (season ending 30 September 2011) and Korea is New Zealand’s number three export beef market by value, worth $203.1 million (season ending 30 September 2011).

“Beef + Lamb New Zealand works on behalf of farmers in these markets to introduce consumers to New Zealand grass-fed beef and then to develop a preference for it,” Hundleby says.

“Working with chefs and encouraging them to use our product is an important part of getting more Japanese and Korean people to eat New Zealand beef. Influential media also have a valuable role to play in highlighting the health benefits of grass-fed beef that make it lower in fat and higher in Omega-3s than grain-fed beef.”