August 9, 2011

Sheep and beef farmers in New Zealand received annual tariff savings of nearly NZD25 million (US$20 million) a year under China's free-trade agreement (FTA) and the amount is set to rise as export volumes grow.

CEO of farmer organisation Beef + Lamb New Zealand (B+LNZ), Dr Scott Champion said in the 2010 year New Zealand's trade with China included nearly NZD700 million (US$572 million) worth of sheep and beef products.

"Those volumes are trending upwards as China continues to develop rapidly, with a growing middle class population looking to increase protein consumption, and that includes our beef and lamb.

"The number of consumers considered to be wealthy from a global perspective is growing significantly and this is driving increased consumption of imported food products."

It was B+LNZ that represented New Zealand sheep and beef farmer interests alongside government when the FTA was being negotiated.

China is New Zealand's second largest sheepmeat market by volume, importing 29,800 tonnes. New Zealand's total sheepmeat exports are 355,000 tonnes with 72,600 tonnes going to the UK and 25,100 tonnes going to the US.

"Crucially, the Chinese market is looking for quite a different product mix compared to our traditional sheepmeat markets such as the UK and US which take the higher value cuts like lamb legs and French racks."

China is a key market for sheep flaps which are used in the traditional Chinese 'hotpot' dishes. It's also a key market for co-products like fats and oils and animal casings. This trade was worth NZD170 million (US$139 million) last year and the China FTA provided estimated tariff savings of almost NZD12 million (US$9 million) on co-products alone. It underlies the importance of co-products and their contribution to the value of annual exports.

Dr Champion said it is likely the China FTA will deliver another NZD21 million (US$17 million) by the time the tariffs are fully eliminated in 2016.