Strong beef prices likely to continue for cattle farmers
Strong market demand for New Zealand beef products should continue to bring high prices for cattle farmers into the new season.
The market is expected to remain vibrant because New Zealand’s closest competitor, Australia, was looking to re-build its herd after large cullings of capital stock and demand was high for Kiwi beef in the Asian and North American markets, said ANZCO chairman Sir Graeme Harrison .
Critical to maintaining that strength was improved access to those markets, said Harrison at a symposium on hill country farming organised by the New Zealand Grasslands Association and attended by more than 300 people.
Market access would improve with the signing of the Trans-Pacific Partnership Agreement (TPPA), which brought New Zealand closer to a long term regional economic integration with Asia and the Pacific.
The agreement also established a platform for other trade deals with the signing countries and the biggest opportunity for that was Indonesia.
For a free trade agreement to be established in the Asia-Pacific, the United States would ideally accommodate China.
“If that were to occur, a re-invigorated World Trade Organisation should follow,” said Harrison.
In contrast to beef fortunes, Harrison expected the lamb market would continue to stagnate.
Demand from European consumers was subdued because of a sluggish economy and this did not help the restaurant trade where the bulk of New Zealand lamb was eaten.
There was also high domestic supply from United Kingdom sheep farmers.
“They had a good production year for growing lamb, but it’s staying in the UK, it’s not being exported in the volumes it was and that makes a big difference.”
He said the protests by UK sheep farmers were because of market frustrations and New Zealand lamb was an easy target.
There was good demand elsewhere in other markets, but this was not enough to lift the overall price.
“China is the key in terms of being able to lift the price overall.”
Some of the poor pricing was also due to the slump in co-products such as pelts.
Harrison said greater market access was essential for the future prosperity of hill country farming, where the bulk of New Zealand’s beef and lamb was grown.
“Asia’s growing demand for protein is real and forging partnerships beyond the farmgate is necessary if increased market segmentation and consumer targeting are to achieve price premiums for hill country’s farming credentials.”
In 2012, 6 per cent of New Zealand’s GDP came from the growing and harvesting of raw agricultural products on farms. Product processing lifted that total contribution of the agricultural sector in the New Zealand economy to one dollar in every four.
“We negotiate trade agreements because we seek advantage, for New Zealand is a trading nation. Our domestic market is small, our access to capital is limited so we need to look externally for growth and development.”
In 2009, the United Nations published global food demand forecasts up until 2050. Compared with actual consumption, the projected growth for meat demand was expected to outpace dairy.
Most of this demand would be supplied by chicken and pork, but it would also present “unprecedented opportunities” for New Zealand meat especially beef, Harrison said.
“Today’s food security reality is that 60 per cent more animal protein-sourced foods will be needed by 2050 to satisfy the growing middle class demand. In the end, you either believe in the middle class growth story in Asia and the increase in protein demand, or you don’t … and I believe in it.”
Harrison will leave for China shortly with Prime Minister John Key and others to try and negotiate greater access to that market, including gaining chilled beef access and access for manufactured meat products, which New Zealand does not have.
He said this presented a huge opportunity for New Zealand.
There were opportunities for value added products, but competing commodity demand had made it difficult to implement a value added strategy by any New Zealand meat company and so far it had been a “flop”.
A credible providence story based on integrity and linking this to customers through partners down the value chain was needed.
“For this to grow, true partnership will be vital between farmers, processors and other links in the value added chain.”
New Zealand’s limited success to adding value to its products has been because of its small domestic market, trade barriers, geographic isolation, capital restraints and entrenchment in commodities.
The New Zealand trader transactional relationship model that had characterised the meat industry would need to change and a “win win approach”, was the way forward, he said.