March 28, 2008

New Zealand industry must adapt to change (Press Release)
 

Increasingly complex consumer demands abroad and dynamic agricultural conditions at home are driving the need for New Zealand's export meat sectors to adapt, according to the recently released Global Focus report titled New Zealand's Meat Industry - Adapting to Change.

The report by leading food and agribusiness bank Rabobank, says that unprecedented shifts in demand and supply and increasingly volatile commodity cycles will conspire to force producers and processors to innovate and seek new efficiencies.

However despite the changing land use, static or falling livestock numbers and rising production costs that are facing the industry, international market conditions for New Zealand's meat products are largely favourable, and should offer opportunities for improved profitability for farmers in the medium to long term says the report's author, Rabobank senior analyst Hayley Moynihan.

"Consumers in New Zealand's premium export markets are demanding enhanced product attributes, yet growth in meat demand is accelerating fastest in markets for lower value meat products. With lower New Zealand production levels, the industry will face increasing pressure to choose between a focus on high value markets or expanding exports into new emerging markets for commodity proteins," she says.

Demand for New Zealand's meat exports is increasing, but supply is under pressure.

During 2007, both New Zealand and Australia only filled their US beef quotas to around 77 per cent due to supply constraints and economic returns available. Accordingly, the report states that headroom exists to substantially increase New Zealand beef exports, particularly to the US, as that market is experiencing a considerable degree of uncertainty and cow beef production is expected to move lower during 2008.

Rabobank expects New Zealand's export meat volumes to decrease during 2008 and 2009, with supplies of beef, lamb and venison all likely to reduce as the herd or flock size declines.

This reduced New Zealand meat production, says Moynihan, will have implications for other parts of the supply chain, particularly the processing industry. "The costs associated with these changes will be reflected in livestock prices and returns until capacity adjusts," she says.

"Volume is still important for international trade," Moynihan notes. "New Zealand has always punched above its weight in agricultural export markets and will need to continue to do this."