July 18, 2007

New Zealand's cattle farmers worry about dairy beef flooding markets

New Zealand's cattle farmers are now worried that the current dairy boom could flood the global markets with second grade dairy beef and cause high value niche markets to lose out.

A Federated Farmers leader, Keith Kelly, has warned that the rise in dairy commodity prices could affect the industry's high- value niche markets.

The dairy boom could result in more second-class dairy beef on the market and force price drops in prime beef prices, Kelly told the annual meat and fibre producer council conference in Auckland.

Kelly, the council's chairman, said there is a need to ensure prime beef continues to receive top dollar. 

The prime-beef market needed protecting as it was ``the creme de la creme'' of the industry, he said. Once contamination starts, demand for prime beef would decline because people would be shopping on price, he said.

Kelly said exporters also need to focus more seriously on Asia now that mad cow fears are wearing thin and consumers there are now looking to American beef as restrictions from Japan and South Korea are gradually lifted.

However, he noted that American cattle, being fed on corn, might suffer a disadvantage from high corn prices, compared to New Zealand cattle fed on pasture.  

The US remains New Zealand's largest market, with 213,402 tonnes a year exported there.

A report by Rabobank said that despite the US regaining access to Asia, increasing demand from other markets would help increase New Zealand's beef exports.