The article below was published by the ‘Main Report’ on 22 Feb 2010. It was as based on a telephone interview they did with me, and as with most media interviews, the ‘sound bites’ that finally got published were not under my control. But it makes what I regard as important points that China and the Middle East are where much of the future action has to be. It could also have made the point that lamb currently sells in Europe for a higher price than beef or other meats, and it is therefore not easy to further raise the price. The fact that the Europeans are, for a range of reasons, reducing their own lamb production is a double-edged sword. On the one hand it creates potential space for our NZ product, but it does not augur particularly well for the long term future of a product that is internationally in decline. The other counter point is that with NZ lamb production declining, there has actually been an increasing proportion going to the European quota markets, which have to date been the best paying markets.
Meat companies are copping some unfair flak from farmers and industry watchers who gripe about prices received from supplying Europe’s supermarkets. But Keith Woodford, Professor of Farm Management and Agribusiness at Lincoln University and some-time adviser to Silver Fern Farms and Blue Sky Meats, says in reality, the region which takes some 60% of NZ’s lamb shipments and pays the best prices has limited scope to grow. “We’re not that important to Europe’s supermarkets – we need to get our lamb on their shelves much more than they need to put it there.” Europe also has slowing population growth, little wages growth and the elephant in the room – a quota restricting imports to 230,000 tonnes.
Woodford says the most exciting prospects are China and the Middle East – and down the track, India, if non-trade barriers can be overcome. Right now, Chinese consumers get the budget end of NZ lamb – cuts like breast flap, which is turned into lamb roll and sliced thinly for hotpot. Meat companies are trying to work out at the moment how to “work up the market chain in China” to supply higher-value meat.
Much soul searching has gone into marketing strategies like Silver Fern’s Plate to Pasture idea, but there’s still a reality gap between the behaviour of farmers and meat companies/exporters. Woodford says if meat companies knew at the start of the season what their supply was going to be they’d have more bargaining power in export markets. Instead, they’re faced with lumpy supply and farmers unwilling to commit, difficult weather and sheep determined to lamb in the spring. This is the current situation, with farmers holding onto their animals, prompting meat companies to offer “a bit more” for lambs in the past few weeks. Woodford says “it’s probably holding us back, but we have to recognise it’s the games farmers play as well as the games meat companies play