Value of exported goods, including meat, falls

The value of New Zealand’s exported goods fell $423 million (11 percent) to $3.5 billion in October 2012, compared with October 2011, says Statistics New Zealand.

“Almost half of the fall in export values was due to the falling value of dairy,” industry and labour statistics manager Louise Holmes-Oliver says. “This was despite an increase in dairy quantities.”

The value of imports rose $70 million (1.7 percent). Contributors to this rise were capital goods, up $94 million, and consumption goods, up $64 million, while intermediate goods fell $83 million.

The trade balance for October 2012 was a deficit of $718 million (21 percent of exports). This compares with a deficit of $226 million (5.8 percent of exports) in October 2011.

Seasonally adjusted exports fell 14 percent compared with September 2012. There was a large fall in milk powder, butter, and cheese exports, following two large decreases in August and September. Seasonally adjusted imports fell 8.0 percent in October 2012.

The seasonally adjusted meat and edible offal commodity grouping fell by eight percent ($39 million), with quantities down 12 percent. This follows increases in both values and quantities in September 2012. Trends show that the group has been rising since its most recent low point of March 2011 and is one percent lower than its high of July 2011.

The trend for exports remains at a high level, but is 6.3 percent lower than its peak of November 2011. The trend for imports has shown little change in recent months, and is now 7.0 percent lower than its record high of September 2008.

Silver Fern Farms bullish in spite of $31 million loss, says Barber

Allan Barber has been speaking to Silver Fern Farms (SFF)’s chief executive Keith Cooper, following this afternoon’s announcement of a big loss for the co-operative for the year ending 30 September 2012. In his latest blog post, Barber reports finding Cooper bullish in spite of the loss.

Cooper confirmed the effect of lamb on the season’s losses, saying SFF had been comfortable with what it was paying for lambs price before Christmas. Market demand had suddenly stopped dead in February because of the market price and companies had all been hit by exposure to expensive stock, unable to reduce the price quickly enough. The net result was too much product going into overvalued inventory which resulted in a write-down of $25.6 million at balance date.

The company’s media release has highlighted the same reasons as Alliance for the loss, says Barber – unjustifiably high procurement cost, high dollar, sudden drop in market demand, inventory writedown – but made very positive reference to the future outlook. It has made significant new investments, including the Te Aroha rebuild, $8 million of new marketing initiatives and $4 million commitment to FarmIQ.

In the current year, SFF intends to invest a further $22.6 million in brand development, marketing initiatives and FarmIQ. According to chairman Eoin Garden, this “clearly demonstrates our confidence in, and commitment to, the growth path we have charted for our company” notwithstanding the poor performance during the year ended September.

High inventories are already being substantially sold down to a point where the company’s inventory level is already much closer to normal for this time of the year, lonely six weeks after balance date. As will be the case with Alliance the equity ratio will have already benefited from this.

The suspicion that SFF’s loss would not be a large as that posted by Alliance because of a greater proportion of beef in its kill proved to be correct. Nor did SFF have to take any plant closures on the chin. CEO Keith Cooper said the company’s footprint was consistent with livestock numbers and no further closures were under review.

In answer to a question about further industry rationalisation Cooper said SFF had already taken over two small companies, Frasertown and Wallace, and he was always in favour of aggregation. This invariably involved smaller companies being acquired by one of the big four. However it was ultimately up to farmers to decide on the industry’s structure, because industry rationalisation only lasted so long before a new processor emerged, which farmers would then typically support.

The general mood in the meat industry, confirmed by SFF, is positive for the new season. Procurement prices are aligned with the market, livestock volumes are stable, even recovering slightly, and capacity is fairly well balanced with throughput.

In conclusion, Keith Cooper said while 2011/12 was a poor year financially, strategically it was a progressive one. “2012 marked a continuation of our unwavering commitment to executing our Plate-to-Pasture strategy. This is a progressive and long term plan, which demands perseverance and determination, to ultimately generate sustainable value for our farmer-partners, by meeting the modern consumer’s requirements.”

This article appears also at Allan Barber’s Barber’s Meaty Issues. Read more …

Meat exports contribute to trade surplus

Meat and edible offal export values – New Zealand’s second largest export commodity – have contributed to a seasonally adjusted trade surplus of $147 million,  led by an increase in exports, according to new merchandise trade figures released today by Statistics NZ.

The surplus follows trade deficits of $698 million in the March 2012 quarter and $581 million in the June 2012 quarter.

Exports rose by 5.1 percent to $11.9 billion in the September 2012 quarter, says Statistics NZ. While the increase was led by a rise of 16 percent ($450 million) in the value of milk powder, butter and cheese, meat and edible offal  was also up 10 percent in value ($128 million), with quantities up 14 percent. Value increases for fruit and wine also contributed.

The trend for exports is 1.8 percent lower than its record high of September 2011.

 

Global meat production and consumption curbed

A new United States report looks at how disease and drought have curbed global meat production and consumption, notes shifts in geographical areas of production, calls for lowering individual meat consumption and for meat production to be “reconnected to the land and its natural carrying capacity”.

Global meat production rose to 270 million tonnes (297 million short US tons) in 2011, an increase of 0.8 percent over 2010 levels, and is projected to reach 270 million tonnes (302 million tons) by the end of 2012, according to new research conducted by the Washington DC-based Worldwatch Institute’s Nourishing the Planet project (www.worldwatch.org) for the Institute’s Vital Signs Online service.

In comparison, the report shows that meat production rose 2.6 percent in 2010 and has risen 20 percent since 2001. Record drought in the U.S. Midwest, animal disease outbreaks, and rising prices of livestock feed all contributed to 2011 and 2012′s lower rise in production, write report authors Danielle Nierenberg and Laura Reynolds.

Also bucking a decades-long trend, meat consumption decreased slightly worldwide in 2011, from 42.5 kilograms (kg) per person in 2010 to 42.3 kg, the authors note. Since 1995, however, per capita meat consumption has increased 15 percent overall; in developing countries, it increased 25 percent during this time, whereas in industrialised countries it increased just two percent. Although the disparity between meat consumption in developing and industrialised countries is shrinking, it remains high: the average person in a developing country ate 32.3 kg of meat in 2011, whereas in industrialised countries people ate 78.9 kg on average.

Pork was the most popular meat in 2011, accounting for 37 percent of both meat production and consumption, at 99 million tonnes (109 million tons), the report notes. This was followed closely by poultry meat, with 92 million tonnes (101 million tons) produced. Yet pork production decreased 0.8 percent from 2010, whereas poultry meat production rose three percent, making it likely that poultry will become the most-produced meat in the next few years.

The report also says that production of both beef and sheepmeat stagnated between 2010 and 2011, at 61 million and 12 million tonnes (67 million and 13 million tons), respectively

.A breakdown of meat production by geographic region reveals the dramatic shift in centres of production from industrialised to developing countries over the last decade. “In 2000, for example, North America led the world in beef production, at 12 million tonnes (13 million tons), while South America produced 11 million tonnes (12 million tons) and Asia 9.1 million tonnes (10 million tons). By 2011, North America had lowered its beef output by 180,000 tonnes (200,000 tons) and was overtaken by both South America and Asia, which produced 14 million  and 15 million tonnes (15 million and 17 million tons), respectively.”

The United Nations Food & Agriculture Organisation (FAO) puts the slowdown in growth in industrial countries to rising production costs, stagnating domestic meat consumption and competition from developing countries.

Widespread and intense drought in China, Russia, the US and the Horn of Africa contributed to lower meat production—-and higher prices—-in 2010 and 2011. The combination of high prices for meat products and outbreaks of new and recurring zoonotic diseases – those transmitted between animals and humans – in 2011 curtailed global meat consumption.  In 2011 alone, foot-and-mouth disease was detected in Paraguay, African swine fever in Russia, classical swine fever in Mexico, and avian influenza (H5N1) throughout Asia. According to a 2012 report by the International Livestock Research Institute, zoonoses cause around 2.7 million human deaths each year, and approximately 75 percent of all emerging infectious diseases now originate in animals or animal products.

Many zoonotic disease outbreaks can be traced to concentrated animal feeding operations (CAFOs), also known as factory farms. These systems now account for 72 percent of poultry production, 43 percent of egg production, and 55 percent of pork production worldwide.

“Factory farming systems contribute to disease outbreaks in several ways,” says Danielle Nierenberg, report co-author and Worldwatch’s Nourishing the Planet project director. “They keep animals in cramped and often unsanitary quarters, providing a breeding ground for diseases; they feed animals grain-heavy diets that lack the nutrients needed to fight off disease and illness; and many CAFOs feed animals antibiotics as a preventative rather than a therapeutic measure, causing the animals—-and the humans who consume them—-to develop resistance to antibiotics.”

But not all livestock are reared in industrial or mechanised environments. Nearly one billion people living on less than US$2 a day depend to some extent on livestock and many of these people are raising animals in the same ways that their ancestors did.

“Lowering individual meat consumption would alleviate the pressure to produce more and more meat for lower and lower prices, using rapidly dwindling natural resources,” say Nierenberg and Reynolds. “Reconnecting meat production to the land and its natural carrying capacity, as well as reducing meat consumption, can thus greatly improve both public and environmental health.”

Further highlights from the report:

  • Over the last decade, meat production grew nearly 26 percent in Asia, 28 percent in Africa and 32 percent in South America.
  • In 2012, drought and corn crop failures continue throughout the United States, causing the U.S. Department of Agriculture to estimate that by 2013, beef will cost 4-5 percent more than in 2010, pork 2.5-3.5 percent more, and poultry 3-4 percent more.

A full copy of the report can be purchased here.

 

‘Agflation’ to hit animal protein

Skyrocketing agricultural commodity prices are causing the world to re-enter a period of ‘agflation’, with food prices forecast to reach record highs in 2013 and to continue to rise well into Q3 2013. Unlike the staple grain shortage 2008, this year’s scarcity will affect feed intensive crops with serious repercussions for the animal protein and dairy industries, according to Rabobank.

Luke Chandler global head of agri-commodity markets research at Rabobank comments, “The impact on the poorest consumers should be reduced this time around, as purchasers are able to switch consumption from animal protein back towards staple grains like rice and wheat.

MeatExportNZ covered this topic in a post last week ‘Global meat prices to surge’ but Chandler makes some additional points.

Firstly, that he does not anticipate the current period of agflation leading to the unrest witnessed in response to the shortage in 2008.

Rabobank estimates that the Food and Agricultural Organisation (FAO) Food Price Index will rise by 15 per cent by the end of June 2013. In order for demand rationing to take place, in turn encouraging a supply response, prices will need to stay high. As such Rabobank expects prices – particularly for grains and oilseeds – to remain at elevated levels for at least the next 12 months.

Chandler says that whilst the impact of higher food prices should be reduced by favourable macroeconomic fundamentals (low growth, lower oil prices, weak consumer confidence and a depreciated US dollar); interventionist government policies could exacerbate the issue.

“Stockpiling and export bans are a distinct possibility in 2012/13 as governments seek to protect domestic consumers from increasing food prices. Increased government intervention will likely encourage further increases in world commodity and food prices,” he warns.

Rabobank expects that localised efforts to increase stockpiles will prove counterproductive at the global level, with those countries least able to pay higher prices likely to see greater moves in domestic food price inflation. This is a vicious circle, with governments committing to domestic stockpiling and other interventionist measures earlier than usual – recognising the risk of being left out as exportable stocks decline further.

On top of that, Rabobank warns that global food stocks have not been replenished since 2008, leaving the market without any buffer to adverse growing conditions. Efforts by governments to rebuild stocks are likely to add to food prices and take supplies off the market at a time when they are most needed.

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.”

Meat inspection no longer exclusively provided by AsureQuality

Last Tuesday, AFFCO’s Imlay plant in Whanganui was the first to be allowed to introduce meat inspection by its own employees. Till then this function has been performed exclusively by government employed meat inspectors, originally employed by MAF, subsequently by the state-owned-enterprise AsureQuality, writes Allan Barber.

The proposal to allow meat companies to have a hand in meat inspection finally saw light of day about two years ago, although the companies have been dissatisfied with the government monopoly for many years. I can remember the issue raising its head in the early 1990s when the meat inspectors went on strike because of pay and conditions.

AFFCO, for whom I worked at the time, had its production disrupted by a group of employees on its plants, employed by a different employer on different terms from its own workforce and belonging to a different union, the Public Service Association (PSA). Not surprisingly, AFFCO was unhappy at this state of affairs.

But 20 years later, after negotiations and discussions with MAF, then the Ministry for Primary Industries (MPI) and a trial at Imlay, overseas regulatory authorities (notably USDA and EU) have approved the equivalence of the proposed inspection procedure.

There will still be at least two AsureQuality food safety assessors monitoring each shift and final oversight of the product remains the responsibility of the MPI Verification vets on the plant. The most significant difference will be in the total number of employees, because on all plants there have been up to 12 meat inspectors and supervisors across a two shift operation.

In future, meat workers on the chain will be responsible for their own inspection, supervised by official inspectors who must be trained to the same level and subject to the same performance checks as AsureQuality’s inspectors. There will be considerable savings from the new system which the PSA argues will place an undue emphasis on production at the expense of food safety.

MPI released the proposed Post Mortem Inspection regulations for cattle, sheep and goats and asked for submissions by 13 July this year. The response, from what I assume was the PSA, raised several concerns about the risks to New Zealand’s reputation for safe food which the current inspection model had guaranteed for more than three decades. MPI’s replies to the objections indicated its satisfaction with the proposed process which overseas authorities had already approved.

In its submission, the PSA also stated its willingness to discuss opportunities for more flexibility and productivity gains. This all sounds constructive, until one realises the meat companies have been trying for at least 20 years to do just that without success.

A further four meat plants – Alliance Smithfield, Silver Fern Farms Pareora, Riverlands Blenheim and AFFCO Manawatu – will adopt the new company meat inspection procedure by the end of January 2013. At this point, a review will be conducted before approval for a rollout across the industry over the next two seasons.

Kelvan Smith, AsureQuality’s group manager operations, says that the SOE accepts what is happening is inevitable, but wants to make sure it has a clear understanding of the industry’s timetable for the change. His main concern is to manage the impact on employees of what is likely to be a 50 percent reduction in staff numbers by the end of the process.

It is possible that not all meat processors will want to change from the present system, especially if they have a good working relationship with the meat inspectors working at their plants. However, cost pressures make this unlikely, if the new arrangements work well. The PSA and its affected members will be keeping their fingers crossed.

 

Hickson buys Welsh meat plant

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

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.”

Read more …