Category Archives: Red Meat Sector Conference

News hot from the Red Meat Sector Conference.

Food’s changing world and demands

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Hyperglobalisation, China, mega cities, urbanisation and water are some of the big issues that will play their part in the future of the New Zealand and global export meat industry, according to several Red Meat Sector Conference speakers.

In his presentation about the political and economic environment facing the industry, Colin James of the Hugo Group said it is becoming more and more difficult for a nation to act independently these days. ‘Hyperglobalisation’ refers to the increasing global interdependence and interconnectedness, which make protection from global economic forces more difficult, he said.

We can expect more of the same over the next 20 to 25 years, he explained. “It’s going to need a fair amount of resilience.”

Water, along with fossil fuels, will be the big issues, he predicts. Multinationals are rebranding and adopting a “fresh, clean, natural” stance rather than ‘clean, green’ approach to capitalise on the emergence of an affluent middle class in emerging markets. This growing middle class around the globe is calculated to encompass more than 210 million new households with income of US$20,000 or more by 2025, which he believes New Zealand is well placed to serve.

Four percent global GDP growth predicted

New Zealand’s top ten trading partners are projected to grow roughly four percent a year in 2012 as weighted by the goods trade. “Modest, but not boom time,” James commented.

Four percent in global GDP growth also stood out for Richard Brown of market research company GIRA, who admitted to being surprised that the forecasts were so positive. The leader is China, whose GDP is anticipated to grow in 2011/2012 by 8.5 percent, “not as good as expected but still OK”, followed by Indonesia (6.5 percent). He anticipates similar growth in 2012.

In his detailed look at the outlook for various meats, including beef and sheepmeat, he said that global prices for meat are generally, “fundamentally more exciting than they have been.” He was reassured with the direction of the trends, which he said were, “very good news for the producing sector.”

In 2011, prices had gone up boosting producer morale, because total global meat production was down – largely as a result of the outbreak of the pig disease PRRS in China, Brown explained. “What that illustrates is the Chinese effect on global trade is profound.”

This point was echoed in a later presentation from McDonald’s senior director and head of strategy for China and Hong Kong Arron Hoyle, who said that China is having a dramatic effect on global commodities.

“We don’t sell beef at McDonald’s, we sell a burger, so other commodities have to be taken into account.”

Rise of the dragon

Both James and Brown pointed to the current difficulties in the US and in Europe, which is facing big problems with the Euro. Europe had a “spectacularly fragmented meat industry,” Brown said and pointed to problems with the region’s biggest meat company, Vion, which is now in trouble after a period of rapid acquisition. This reflects a lower rate for now for global corporate processor consolidation “with a long way to go and an unproven success record.”

Arron Hoyle also pointed in his presentation to the ‘rise of the dragon’, the lean away from the west to the East, with McDonald’s choosing to target consumers in what it calls the APMEA (the Asia Pacific, Middle East and East Asian) region.

Unprecedented urbanisation

Hoyle talked about urbanisation in those emerging markets, such as China and India, “like we’ve never seen it before.” In the APMEA countries populations are moving from rural to urban settings in a similar manner to Britain’s Industrial Revolution, “but it’s happening 20 times faster and involves about 800 times more people,” he explained.

“We’re living in an era where we’re seeing different dynamics to the previous 50 years,” he said, adding that volatility will be more extreme than ever before.

‘Mega Cities’, those with populations of more than 10 million, are on the rise and currently count Shanghai, Mexico City, Sau Paolo, Beijing, Mumbai and Delhi as the top six.

“In addition, emerging market cities will be a key driver of global food demand with key 440 cities identified across Asia. With this explosion in urbanisation we see many ‘tier two cities’ with populations over one million evolve: By 2020 it is projected China will have 221, India 50, Indonesia 15 and Korea nine.”

With this trend comes a “massive” transport and infrastructure need, but also a forecast quadrupling of per capita of GDP by 2020, said Hoyle.

“It’s a world of opportunity for years to come,” he said cautioning that it also comes with higher rents and increased pressure on costs for McDonald’s stores or other businesses that target Asia as a key future growth driver.

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

 

Nearly quarter of a billion being invested in red meat

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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).

Telling the story

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The meat industry needs to market itself better and tell its story, according to several presenters at the Red Meat Sector Conference.

Marketing of industry is all about building trust in the integrity of the brand, Meat and Livestock Australia’s managing director Scott Hansen told delegates.

“We’ve learned the best defence against attacks on the industry is  the farmers themselves to become advocates for their industry and their own businesses.”

“Not only do we have to sell a product, we have to sell the industry.”

Keeping consumers informed, however, has become way more complex. Consumer-driven US company Agri Beef has identified that, in the US, the 28-45 year age group – the “Digital Moms” – go online first to make decisions.

They don’t want to know how animals are slaughtered, but they do want to know the animals are treated well and that the product is safe to eat, said the company’s executive vice-president Rick Stott.

Blogs and videos are two weapons in the armoury. Three young US farmers produced a low-cost home-produced rap video about their work on the family farm that went viral after being posted on You Tube and, at the time of his speaking, Stott said had received over 4.5 million views.

The rapid rise and uptake of social media and the use of smartphones around the globe in the past couple of years is changing the way businesses communicate with consumers and was remarked on by several of the presenters.

New communication channels that retailer Progressive Enterprises is using here in New Zealand to directly interact with its consumers include Facebook, You Tube, smartphone applications and QR Codes alongside tailored emails and promotions aimed at loyal consumers, according to its general manager for merchandise Murray Johnston. This all runs alongside print and TV advertising.

Through the use of interactive technology, for a consumer, “brands are now yours. You make them,” he said.

Pinterest’s bulletin boards were also pointed to by Stott and MLA’s Scott Hansen, while B+LNZ Inc chief executive Rod Slater talked of PLUCK, which smartphone-enabled consumers can use in conjunction with television advertisements.

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

Be smart: keeping consumers happy

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Keeping its consumers happy and listening to what they want has significantly improved McDonald’s business performance including financial returns, according to one of the company’s top China-based executives.

Introduced as a “good friend of New Zealand beef” at the Red Meat Sector Conference, Arron Hoyle, McDonald’s senior director and head of strategy for China and Hong Kong and a major customer for New Zealand’s lean manufacturing beef, said that the result deserved “a massive thank you to the New Zealand meat industry.”

McDonald’s had selected New Zealand and Australia as its sources of beef for the region because of the two countries’ reputations for food safety. While the US is still the largest market for the company, the company is significantly growing its presence in the APMEA countries.

In 1990, McDonald’s entered China, the fastest growing market in the world, when it opened its first store in Beijing. In 2010, it had 1,000 stores open and by 2013 will have 2,000.

All new stores will have a uniquely McDonald’s style, reflecting Chinese expectations for a modern, trendy image.

“We found that we need to ensure consistency in supply of style and expectations.”

There is no silver bullet, he went on to say. “You have to work extremely hard and to understand your consumer better than your husband or wife.”

He believes that New Zealand is well positioned to grow in Asia, particularly in China with its need to “import virtual water” due to ever growing water constraints as the country develops.

The Chinese market changes rapidly depending on the supply/demand dynamic. McDonald’s is forecasting beef growth to 7-8 million tonnes a year by 2020 and McDonald’s China demand alone to surpass 60,000 metric tonnes per annum.

McDonald’s likes to think it’s a great partner for NZ, says Hoyle, “the industry and all suppliers we partner with, we really like New Zealand beef. We don’t manage the supplier, we manage the business together in a partnership with suppliers.”

For the New Zealand beef team, it’s going to be a case of being better at the value chain, to execute against the opportunity, measure effectiveness versus efficiency and being faster than the competition to solutions.

“The data is showing us the opportunity is behind the hill. We need to work together to get there,” he said.

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

Delivered: second Red Meat Sector Conference

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Delivered, as promised: Excellent, inspirational and thought-provoking speakers, all appearing in a packed programme for the 250 delegates attending the second Red Meat Sector conference.

Congratulations must go to the Meat Industry Association (MIA) and Beef + Lamb NZ Ltd (B+LNZ), joint organisers of this year’s well-attended Red Meat Sector Conference at Rydges Lakeland Resort hotel in Queenstown.

Alongside heartening optimism for future demand for red meat, recurrent themes were the massive potential for New Zealand of emerging markets in Asia, especially China, water issues, the need to utilise best practice, the need for all links in the chain to tell the industry’s story to the public, plus the rapid emergence of social media as a tool for communicating with consumers.

In his opening comments, MIA chairman Bill Falconer also noted that, while not as quickly as some would like, encouraging progress is being made on the Red Meat Sector Strategy and that “small starts are being made across the board.” Later in the day Rob Davison, from the B+LNZ Economic Service, outlined a number of matrices that the Economic Service is developing that will help to track progress against the strategy, and these matrices will “focus conversations, thinking and actions to drive the future”.

The Conference also saw the announcement of new Primary Growth Partnership (PGP) funding for the red meat sector, for a project to develop high-value grass-fed marbled beef, using Waygu genetics.

All the presentations were a veritable smorgasbord of information, packed with facts, statistics and views from many facets of the industry, enabling delegates to pick out what was relevant for their part of the value chain. While every single one of the speakers was passionate and eloquent about their topic, from an export food manufacturing perspective the highlights were excellent presentations from McDonald’s Arron Hoyle and vertically integrated meat processor Agri Beef’s Rick Stott from the US.

Besides the serious business, there was entertainment and laughter too. Lunch – finger food featuring B+LNZ Ambassador chef Ben Battersbury’s speciality “alternative cuts, not cheap cuts” like lamb riblets –  was amusingly heralded with witty comments from him. After dinner speaker Davey Hughes of Swazi Apparel gave an hilarious account of hunting expeditions in Africa and shared a few (tongue-in-cheek) items from his latest collection, including a new ‘mankini’.

Also noteworthy, was a significant Australian presence at the conference in the form of representatives from Meat & Livestock Australia and Aus-Meat. This put physical form to MLA’s managing director Scott Hansen’s opening comment in his presentation that “Australia sees a close collaboration with New Zealand.”

There was positive feedback from delegates, who came from all parts of the sector, including farmers, processors, equipment suppliers, researchers and media.

This article appeared in Food NZ magazine (August/September 2012). Copies of most of the conference presentations are available at www.mia.co.nz or redmeatsector.co.nz.

 

Transformational change (and how to make it)

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One farmer who has made transformational change to his farm business is Marlborough farmer Doug Avery.

In an inspirational and entertaining presentation at the Red Meat Sector Conference, he talked of working “smarter and harder” and the need to “lift yourself up above and see what’s going on around you.”

The tipping point that made him see that he needed to change was sustained drought in the region, over a period of eight years,  which meant that Bonavaree Farm and the Avery family were facing a very uncertain future. In 1998, Doug Avery attended a seminar where Lincoln University pasture Professor Derrick Moot proposed using lucerne as a primary grazing pasture plant. Using that idea started change.

In 2004, with the area still gripped with drought, the NZ Land Care Trust answered a call for help from Avery and a few other farmers. A six-pronged attack on failed systems was engaged with science and the help of funding from the Sustainable Farming Fund and others. This saw the transformational change of the operation from one of failure to one of success.

Having run the emotional gamut of the ‘Three Ugly Sisters’ – envy, anger and blame – Avery realised, when he started looking, that there were some things he could control and others he was concerned about – climate change, weather and the value of the dollar – that he had no control over at all.

Avery realised three things: that the farm business could run 44 percent less sheep but only produce five percent less product; also, that a one percent increase in soil carbon can increase water holding capacity by 144,000 litres per hectare; and, finally, “how much time do we spend telling our story?”

Change of mindset

A change of mindset was also needed, he decided. He would work in what he calls the influence circle, become proactive not reactive, move to solution and enquiry (away from blame and excuse), he would influence thinking and adapt his business systems to the changing climate.

Better practice influenced the systems in place at Bonavaree, says Avery. The year was broken down into three periods: the risk period from mid-December to mid-February where they farm as little as possible; the recovery period from mid-February to late winter, when crops are grown on summer-fallowed land and ewes and hoggets are mated on lucerne and the system charges back into life; and the revenue period, from late summer till mid-December.

“We grow our stock at fast rates to finishing weights before the summer dry,” he said, adding that ewes wean fat and the ewe weights are heavy.

Precious water was conserved by using summer fallow, which intercepted the weed cycle, storing water and creating a water reservoir. Organic matter was built into the soil by stopping tillage. Plants were used that could tap water from deeper layers and also create rapid animal growth and performance. Finally, animals were made for performance, using designer genetics.

Results

The results today speak for themselves. “Lots of wonderful lambs that grow like mushrooms”, and “hogget scanning gone from 40 percent to 165 percent”.

Today, Bonavaree has 1,500 hectares owned and 280 ha leased which will be wintering 13,000 stock units this year (5,000 sheep, 1,650 cattle), growing 90 ha of lucerne for seed and the family is retiring an increasing number of natural areas production. The property has six full-time staff and lots of busy contractors.

Better practice

Better practice for Avery is about using quality contractors, rather than trying to purchase expensive machinery and do it himself, using smart systems like Farmax, inspiring the young who learn by what they see, working with good value chains and smart brands, growing top crops and lambing onto top quality feed, he said.

Reminiscing to the start of his transformational journey, Avery said: “I always wondered why somebody didn’t do something about that, then I realised I am somebody.”

His message for farmers looking to create resilient businesses is to create relationships, manage the soil and water “more crop from every drop”, look at the plant selection for sites and purpose, manage feed supply and demand, work with the natural forces of the local climate, collaborate with science, agency and industry, engage in processes which create financial reward and to create a culture of excitement and fun in the work place.

Bonavaree is now looking to build on its successes through improved management structures, more measuring and collaboration through FarmIQ, better feed conversion in the rumen, improved plant mixes and genetics (plant and animal) and enhanced native plantings and over lay business, says Avery.

Doug Avery has received a number of award for his work at Bonavaree including the 2008 Green Ribbon from the Ministry for the Environment, 2010 Lincoln Foundation South Island Farmer of the Year, 2011 Marlborough District Council Farm Environment Award and the 2012 New Zealand Land Care Trust Ambassador title.