Category Archives: Global Trade

International trade decisions or issues affecting, or with the potential to affect, New Zealand meat.

Business as usual for exports to US, with TPP next focus

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It’s business as usual for New Zealand meat exporters following the re-election of United States President Obama for another four year term, but it’s not time to relax.

Prime Minister John Key has already congratulated the President on his “hard fought victory” and re-election, tweeting last night that he looks forward to further developing the close and enduring relationship between the two countries.

“There will be many opportunities to enhance the relationship, which is built on shared values and a commitment to improve the prosperity and well-being of our people through initiatives such as the Trans-Pacific Partnership (TPP).”

Two-way trade with the US is valued at over $8 billion and the US is a leading source of investment, innovation and business ideas, says the NZ US Council. It is actively engaged in co-ordinating business and government efforts towards concluding a comprehensive, high quality result to the TPP negotiations.

NZUS Council executive director Stephen Jacobi comments that now the election has been decided, it’s positive news for exporters that there will be some certainty over the next four years.

“It’s business as usual for the relationship.”

President Obama will be very energised over his second term he notes. However, that the President will have to work hard on bringing the Republicans with him.

“The TPP initiative is good, in that it is something that can unite both sides, which will have a positive impact on the negotiations.”

The President’s biggest challenge is the state of the US economy, currently facing a ‘fiscal cliff’, and his ability to avoid a complete gridlock between Senate with its Democrat majority and the primarily Republican House of Representatives.

“How he deals with that has implications for New Zealand meat exporters as it will impact on the exchange rate,” says Jacobi, adding that one of the current US solutions – printing money – is bringing the value of their dollar down but is forcing the Kiwi dollar up, making it difficult for New Zealand exporters to operate.

With the Republicans advocating for more farm subsidies, keeping an eye on progress in the US Farm Bill will be important for New Zealand meat exporters too.

The focus now is the next TPP round of talks which take place in Auckland 3-12 December with New Zealand in the chair and hundreds of negotiators from around the Asia-Pacific attending the meeting. It is fortunate that the chief US negotiator remains unchanged, with Barbara Weisel remaining in her position. However, it’s important to note everything won’t be finalised at that meeting. “It’s a continuing process but Auckland will set out how negotiations will roll out in 2013,” says Jacobi, adding that 2013 is expected to see finalisation of the agreement.

Beef will be on the agenda as Canada and Mexico join the table as full members for the first time. Jacobi says he will also be interested to see how other economies, such as Japan, react to the election news as it may speed up their entry to the trade agreement.

The concern for Jacobi is the anti-globalisation movement, which is expected to be active around the time of the talks. He calls for industry, companies and farmers to stand together to explain why it’s important for New Zealand to be in the trade negotiations.

“We need to add our voice to the multitude in support of the negotiations,” he says.

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The US election may bring little change to the Senate agriculture committee with the Democrats retaining control according to Food Business News, while retirements factor into the House of Representatives’ agriculture committee with the Republicans maintaining control there. The finance committees face a similar scenario, says Jacobi. It is likely, however, that there will be a new US trade adviser. Mike Froman, currently assistant to the President and deputy national security adviser for international economic affairs – and a former Harvard classmate of Obama’s – is hotly tipped for the job.

 

 

Emissions from global agriculture bigger than thought

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Britain’s Daily Mail newspaper ran an article this week suggesting that (un-named) ‘experts’ were claiming British shops should sell New Zealand lamb because British farming methods produce twice as much greenhouse gas.

The item, which has been picked up and run in various New Zealand papers, was based around a newly released United Nations Consultative Group on International Agricultural Research (CGIAR) analysis Climate Change and Food Systems. Taking a closer look it’s clear that the comprehensive study itself didn’t actually say that but it was an interesting read, presenting for the first time the GHG footprint for the global food industry and showing that global agriculture is a much larger contributor to climate change than previously thought.

The analysis, which was recently published in the 2012 Annual Review of Environment and Resources presents figures showing that feeding the world released up to 17,000 megatonnes (Mt) of carbon dioxide into the atmosphere in 2008, contributing up to 29 percent of greenhouse gas (GHG) emissions. But while the emissions ‘footprint’ needs to be reduced, a companion policy brief by CGIAR’s research programme on climate change, agriculture and food security (CCAFS) – Recalibrating Food Production – lays out how climate change will require a complete calibration of where specific crops are grown and livestock raised.

Together, the two reports “shed new light on the intertwining evolutions of climate change and the world’s food system and their potential impact on humanity’s relationship with food,” says CGIAR.

Climate change mitigation and adaptation are critical priorities, according to Bruce Campbell, CCAFS’ programme director. “Farmers around the world, especially smallholder farmers in developing countries, need access to the latest science, more resources and advanced technology. This research services as an urgent call for negotiators at the upcoming UN Framework Convention on Climate Change in Doha.”

CGIAR Consortium chief executive Frank Rijsberman says: “We are coming to terms with the fact that agriculture is a critical player in climate change. Not only are emissions from agriculture much larger than previously estimated, but with weather records being set every month as regional climates adjust and reset, there is an urgent need for research that helps smallholder farmers adapt to the new normal.”

Climate Change and Food Systems assesses the entire food system’s emissions ‘footprint’ – in total somewhere between a fifth and a third of the greenhouse gases emitted by people on this planet. “This figure accounts for every aspect of food production and distribution – including growing crops and raising livestock, manufacturing fertiliser and storing, transporting and refrigerating food. Agriculture accounts for around 80 percent of these emissions, but the combined contribution of transport, refrigeration, consumer practices and waste management is growing,” according to CGIAR.

“The food-related emissions and, conversely, the impacts of climate change on agriculture and the food system, will profoundly alter the way we grow and produce food. This will affect different parts of the world in radically different ways, but all regions will have to change their current approach to what they grow and eat,” says Sonja Vermeulen, the head of research at CCAFS and the lead author of the study.

Delving deeper

Climate Change and Food Systems adds the figures across the aggregate global food chain, and assuming a growth in emissions of three percent a year, gives the total global greenhouse gas (GHG) emissions for 2008 in the range of 9,800 to 16,900 megatonnes of carbon dioxide equivalent (MtCO2e) from the food system, inclusive of indirect emissions associated with land-cover change. “Thus the food system contributes 19-29 percent of total global anthropogenic GHG emissions … Of this, agricultural production, contributes 80-86 percent at the global level, while the remainder comes from pre-production (predominantly fertiliser manufacture) and the post-production activities of processing, packaging, refrigeration, transport, retail, catering, domestic food management and waste disposal (landfills).”

Reflecting findings from New Zealand’s own 2010 GHG footprint for lamb, where 80 percent of emissions were also found to be from on-farm, the study notes that packaging for both vegetables and meat “is of minor importance in terms of total food emissions.” Transport “makes a large direct contribution” – for example, of the 19MtCO2e produced transporting food around Britain in 2002, 10Mt were emitted in the UK, all from road transport. An interesting estimate from a US researcher is that the same amount of fuel “can transport five kg of food only one km by car, 43 km by air, 740 km by truck, 2,400 km by rail and 3,800 by sea”. So, if that is correct, transporting the five kg of food 3.15 kms by car is the equivalent of a 12,000 km journey by sea, in terms of fuel used. For New Zealand lamb, transport accounts for five percent of the product footprint.

Refrigeration is noted to be the “major energy-intensive component of the food chain”. Limited data brought together by the study suggests that it accounts for one percent of total global GHG emissions and another researcher has estimated it accounts for 15 percent of electricity use worldwide. Food waste also contributes to GHG emissions directly through methane emissions from landfills and handling the waste to get it to landfill.

New Zealand: lead role

New Zealand has been taking a lead role on the world stage in tackling agricultural emissions. The Pastoral Greenhouse Gas Research Consortium (PGgRC), was established in 2002 and the New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC) opened in 2010. The latter recently released its highlights for 2012 detailing progress made in research focusing on mitigation of methane and nitrous oxide emissions, in understanding soil carbon and in developing integrated systems. The work on the GHG footprint for New Zealand beef was also recently released and will be covered in the forthcoming Food New Zealand magazine (December/January 2012) and included in this blog.

 

Global meat production and consumption curbed

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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.

 

Offshore worries persist, says Alexander

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Some weekend reading for you. In his latest BNZ Weekly Overview (18 October 2012), written during a trip to Europe, Bank of New Zealand economist Tony Alexander says offshore worries persist.

In Europe, the tipping point at which the need to maintain social cohesion outweighs seemingly sensible and necessary economic policies “is the closest it has been since this crisis started.”

He notes various central banks around the world printing money (he doesn’t advocate it for NZ), the increasing media discussion of alternative economic models and rising support in the UK for leaving the EU. He points to soaring global food prices, social tension and international divisiveness resulting from weather-induced crop failures as “very concerning” and go a long way toward explaining why his view on prospects for NZ growth is relatively sanguine.

“We are not going to boom given that people are sensibly concentrating in keeping debt ratios down, there is restraint on some price-based companies from the high NZ dollar (which will remain high), we look fundamentally good to investors as they compare economies and falling food production overseas means higher demand for our commodities and the systems we use to produce them,” he writes.

According to Alexander, challenges include: to facilitate the adjustment of some sectors to a permanently high exchange rate which they cannot live with in the long-term; “get off our butts to take advantage of the demand for our agricultural expertise”; upgrading infrastructure; improving connections between NZ businesses and those overseas; addressing the Auckland housing crisis; and building up public financial reserves to assist during the next crisis.

In addition, Alexander has set up a Facebook page, specifically for discussing the NZ-China relationship and as a tool for disseminating information and “furthering my own still inadequate knowledge,” he says.

The Weekly Overview will be available at the BNZ website in due course, where you can also subscribe by email to receive regular copies.

 

Kiwis keeping an open mind on TPP

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The majority of Kiwis support the idea of a Trans Pacific Partnership (TPP), new research has found.

Research commissioned by the NZUS council has found that 56.3 percent of New Zealanders surveyed support or strongly support the TPP, 13.4 percent oppose the negotiation, with 30.4 percent keeping an open mind.

“The research is an important contribution to the debate around free trade. It shows New Zealanders are preared to see where the TPP negotiation leads rather than give in to scare-mongering,” says NZUS Council executive director Stephen Jacobi.

The research found that just 60.5 percent believe New Zealand needs to do more to connect with global markets, with just 9.4 percent opposing such moves.

The next TPP negotiation round will take place in Auckland in December.

The research also found that a majority of Kiwis (64.4 percent) believe increased trade between new Zealand and the United States is a good idea. Only 12.1 percent are opposed to it.

“Freer trade will create more opportunities for exporters and more choice for consumers and ultimately more jobs for Kiwis. The TPP provides an opportunity to maximise these benefits TPP is a work in progress but it’s an important first step towards adopting a seamless economic space around the Asia-Pacific region,” says Jacobi.

The research was conducted by Buzz Research between 18-21 September 2012 with 1,018 respondents aged 18-64 in New Zealand. It has a margin of error of +/- 3.1.

‘Agflation’ to hit animal protein

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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.

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.

LFTB: lawsuit filed

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US lawyers have filed a US$1 billion + (NZ$1.2 billion+) defamation lawsuit, on behalf of South Dakota based Beef Products Inc, against the ABC News team for a series of comments made on the channel earlier this year about lean finely textured beef (LFTB) – sometimes pejoratively described as ‘pink slime’.

LFTB is lean beef that is separated in a manufacturing process from fatty beef trimmings, to reduce wastage. The process involves treating the LFTB with small amounts of ammonium hydroxide gas or citric acid to eliminate any harmful bacteria present. The process has been approved as safe by the US Department of Agriculture and it has been reported that over 70 percent of ground beef used in the US is believed to have incorporated LFTB as an ingredient.

However, a range of media commentators including ABC News and British celebrity chef Jamie Oliver, criticised the practice and the campaign spread through social media platforms. Despite statements by the USDA and meat industry bodies asserting that LFTB is safe for consumption, a number of major retailers and restaurant chains decided not to use LFTB as a result of considerable negative publicity against the product.

As a result of the campaign, sales dropped off dramatically for the company, which led to it closing three of its four plants in May. The American Meat Institute estimated that without LFTB, the industry would need 1.5 million additional head of cattle to make up the difference in beef supply.

The BPI lawsuit alleges the network’s coverage misled consumers to believe the company’s product was unhealthy and unsafe. News reports note that Walt Disney-owned ABC News has denied the claims and say it will contest them vigorously.

LFTB is not used in New Zealand, as the leaner, pasture-raised New Zealand beef does not produce the high fat trimmings that provide the raw ingredient for LFTB, the Meat Industry Association confirmed earlier this year.

Lessons learned from the LFTB saga were aired at last week’s Australian Meat Industry Council business conference. News reports suggest that various speakers warned that social media could pose a threat and the meat industry needs to be on the front foot when it comes to tackling misinformation.

More information about the BPI lawsuit …

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.”