China is the key market for New Zealand sheepmeats

[This post first appeared online at Stuff and some of their hardcopy newspapers on 4 September 2018, but alas with the first paragraph edited out and with the title “China demand for New Zealand sheepmeat booming”.  In the process,  key apects of the message were lost. Here is the full version]

Some weeks back I wrote how the New Zealand sheep industry is in a sweet spot, with record prices. I also wrote that China is now easily our largest sheep meat market by volume. Here I share the story of some of the things that have been happening in that market, and how demand for New Zealand sheep meats has potential to further increase.

The starting point is to recognise that China’s own sheep industry is much bigger than New Zealand’s.  Whereas New Zealand has about 27 million sheep, China has about 150 million. However, most of these are farmed on arid lands in the west and far north of China, often at high altitude. Much of the product is consumed by the local people and does not reach the big cities.

For the last 15 years, the Chinese Government has been trying to limit the number of sheep in the pastoral zone. The reason is that there has been a lot of land degradation. For the last five years I have been part of a Lincoln University sustainability project up in these pastoral lands and there are major degradation issues with no simple solutions.

Lamb finishing mainly occurs in the lower altitude country using crops and formulated feeds. However, there is a lot of competition from competing land uses, and this limits expansion capacity.

China has about 25 million Muslim people who do not eat pork, and for them mutton is a staple food. Similarly, there are about five million people of Tibetan ethnicity whose major meats are from sheep and yaks.

These Muslim and Tibetan human populations have been growing faster than the overall Chinese population. This population growth has been high because the one-child policy was never enforced in the pastoral regions amongst ethnic minorities. It means that human populations and land capacity are out of balance.

Sheep meats have also become increasingly popular outside of the pastoral regions. This is particularly the case in the north of China including cities such as Beijing, where it is a valued contributor to the hotpot cuisine. However, lamb is also eaten in Southern China.

The big message from all of this is that China has an increasing demand for sheep meats but limited capacity to increase its own production. The only two countries in a position to fill the gap are New Zealand and Australia.

There are no longer any tariffs on sheep meats to China and the supply chain runs smoothly. If problems arise, it is typically because the New Zealand exporters slipped up and failed to follow the strict rules.

The New Zealand Government puts a lot of effort into bilateral trading arrangements with China. Just this month, the Chinese Government has confirmed to New Zealand’s Ambassador its ongoing commitment to foster open trade with transparent rules, and has publicised this with a Chinese Government press release of the meeting and the commitment. []

One of the helpful features of the Chinese sheep meat markets is that forequarter cuts are well suited to the traditional Chinese cuisine. This has meant that New Zealand typically sends the lamb forequarters to China and the hindquarters to Europe or the United States. Equally important is that Chinese hotpot cuisine is also suitable for mutton.

New Zealand’s sheep meat trade with China has to date been largely a commodity business with Chinese traders and processors typically taking ownership at dockside either in New Zealand or China. The question that then arises is whether New Zealand can do more to exploit any value-add opportunities that might exist, and how should New Zealand go about it.

The New Zealand industry organisation Beef + Lamb is currently rolling out an industry-wide global market-branding program called ‘Taste Pure Nature’.  It is meant to be New Zealand’s equivalent to the Irish ‘Origin Green’.

Although ‘Taste Pure Nature’ might sound good in theory, whether it will resonate in China could be another matter. Personally, I am very cautious on this.

One of my ongoing frustrations is that Kiwis tend to assume that ‘Kiwi thinking’ is relevant to Chinese agri-food endeavours. They do this subconsciously.

I am a strong believer that Kiwis need to spend more time in China understanding Chinese culture as it affects food purchase decisions, and also Chinese business behaviours. The pathways to market are very different than in New Zealand.

Within New Zealand there is also widespread unease about China as a trading partner.  A lot of this unease is built on lack of understanding rather than anything explicit.

The challenge for those who think our trading endeavours should be elsewhere is to identify the alternatives. Particularly for the forequarters, which are fundamental to overall profitability of the industry, there are no obvious alternatives.

About Keith Woodford

Keith Woodford is an independent consultant, based in New Zealand, who works internationally on agri-food systems and rural development projects. He holds honorary positions as Professor of Agri-Food Systems at Lincoln University, New Zealand, and as Senior Research Fellow at the Contemporary China Research Centre at Victoria University, Wellington.
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5 Responses to China is the key market for New Zealand sheepmeats

  1. Nick says:

    Dear Woodford

    I really appreciate the insideful information. Everytime I read I learn new things. I totally agree with it. I see many times in New Zealand people fail to understand the Chinese way particular in the business settings. As even in the recent Fontora with Beingmate.

    By the way I am a Chinese.

    Nick Chen

  2. Karen Morton says:

    Dear Mr Woodford can you explain what you mean by a difference in business behaviors.

    • Keith Woodford says:

      Both consumer and business behaviours are influenced by culture and the overarching business and societal environment. In China the business environment is extremely competitive but the regulatory environment is opaque. Also, the rate of change is very high. It requires a special type of agility.
      The strategies that Western companies typically assume will apply in China usually fail. The starting point is for Western companies to recognise that ‘things are different’ and to become a learner without prior assumptions.
      I first went to China as a young agricultural economist / scientist in 1973. I found a society that beat to a different drum. Forty five years later I am still trying to understand that amazing country – a country full of contradictions. Amongst many other things I have learned to expect the unexpected.
      Keith W

  3. Tom Walker says:

    Living in South China (Guangzhou) most western style restaurants have lamb chops on the menu..if it is NZ lamb it would be sold as such and be more pricey than the homegrown lamb.Also you would get lamb dishes at the many Muslim restaurants here as well as at ”barbecue” restaurants that are very popular with young people..these places sell lamb kebabs.

    The local super market sells ”pure south” branded vacuum packed ribs without the loin part…no one in NZ would ever buy a cut like this but the Chinese think that eating meat off the bone it tastes better so I guess that is why they sell this option?

    One other strange thing you witness here in the winter is that you will see a sheep butchered on a busy road by a Muslim guy who then sell cuts to passerby`s..for a Tier one modern Chinese city this makes one take a second glance when seeing it!…but I guess it sums up the many contradictions in ”modern” China how you can have state of the art infrastructure etc and then meat that is not refrigerated because the locals think this takes from the flavour.

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