August 24, 2009

New Zealand pork producers face another subsidy headache, with the US under pressure to support its hog farmers on the back of Canadian subsidies of US$100 million a week ago.

 

US producers are calling for their government to advance US$250 million to prop up their businesses, leaving Kiwi farmers to battle it out in a subsidy-free environment.

 

Adding to the barrage, the EU has just announced support for changing sow housing, on top of the subsidy producers receive a year for each sow.

 

New Zealand (NZ) Pork chief executive Sam McIvor said the Canadian support package would mean cheaper, subsidised pork would make its way as bacon, ham and small goods to New Zealand and undermine the local industry.

 

McIvor said most New Zealand consumers would be none the wiser and retailers and processors should identify their product so they could make an educated choice.

 

He said Kiwi farmers have always had to operate on good business and if they do not, they go out, and saw that last year with 15 percent of production exiting the industry.

 

He said export subsidies put in place by the EU last year for product to go into storage hurt producers this year.

 

The pork from Finland arrived speculatively and was heavily discounted, forcing the meat schedule down by 50 cents to US$3.60/kg for bacon in Canterbury a month later.

 

McIvor said the price drop removed US$25,000 of gross income from the average Kiwi farm in a month.

 

The schedule has since lifted to US$4/kg with a lift in demand, but producers are nervous about the effect of the latest round of subsidies.

 

Kiwi producers have competed in the past against overseas subsidies by innovation, lowering costs and increasing production 5 percent a year over the last 30 years.

 

However, they are under pressure, paying US$450/tonne for grain contracts a year ago. Now spot prices are down to US$300/tonne.

 

McIvor said some of these pressures could be removed by the government easing the resource consent process for new and existing piggeries, ensuring good biosecurity so New Zealand can retain the best pig health status in the world, and allowing skilled overseas workers to continue coming to New Zealand.

 

About 88 percent of producers have achieved 2015 targets for using sow stalls for only four weeks. In Australia and the US, sows remain in the stalls throughout their pregnancy.

 

The pork industry came under criticism for sow stalls this year and has committed to packaging descriptions informing buyers of how the animals are housed.

 

McIvor said the results of free-range products going on shelves have been mixed, with some performing well and others being removed because of lack of interest.