The Meat Industry Association’s annual report for the year ended June 30 emphasises the superb performance of the red meat sector as a whole in a year of significant challenge.
The highlight was clearly the strength of overseas markets, resulting in consistently high prices for beef, sheep meat and co-products, now referred to as the fifth quarter. Exports totalled $11 billion for the first time, a 20% increase on 2021, made up of $4.6b for beef, $4.3b for sheep meat and $2.1b for the fifth quarter, which includes meat and bone meal, tallow, offal, hides, pelts and high-value ingredients for pharmaceuticals, among other products.
The average FoB price of beef was $9.49 per kilo, up by more than $2 on the previous year, and sheep meat averaged $11.82, reflected in unprecedented payments for livestock, which helped to compensate for higher on-farm costs. These export values were reflected in domestic meat prices that have also risen by double digit percentages over the past year. On the one hand, New Zealand’s trade gap, which has reached a massive $27b, would have been even worse without the success of the red meat sector, while on the other domestic inflation is at a level unheard of since the 1980s.
The report highlights the seriously disruptive nature of the past two years since the sector strategy was released with the stated vision of creating a vibrant sheep and beef sector by focusing on three key priorities: to grow profitability and value add, improve sustainability and environmental standards, and work closely together to deliver on behalf of the sector and communities it serves. Since then covid has presented many challenges – shipping, logistics, workforce and processing constraints – and the pace of regulatory and policy change has quickened, while there has also been a change of consumer attitudes and priorities.
The forced restrictions on processing capacity, coupled with chilled distribution and overseas port access problems, prevented meat companies processing the whole carcase to the maximum profitability. At times this resulted in a loss of up to $200 per head of cattle, estimated at loss to the industry of $600 million for the year. The high prices received for frozen product partially offset the inability to export as much of the traditionally higher value chilled lamb cuts to key markets like the United Kingdom and European Union.
Despite all these challenges, the industry succeeded in exporting a record value of meat and co-products to 108 global market destinations. Almost three-quarters of our red meat trade will be covered by free trade agreements, following the signing of FTAs with the UK and EU, although beef access to the EU under the agreement concluded in the FTA negotiations will remain disappointingly low. Further opportunities to achieve FTAs are very limited with a low probability of concluding deals with the United States or India on acceptable terms in the immediate future, unless either country can be encouraged to sign up to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Australia has signed an FTA with India, but dairy remains a sticking point for New Zealand. Agriculture and Trade Minister Damien O’Connor, is not optimistic about the prospect of negotiating an acceptable agreement. That said, the India New Zealand Business Council delegation in India at the moment with representation from the primary sector hopes to re-ignite business relations between the two countries after the covid-induced lull.
China remained the largest export market, taking 37% of the total, which was down from 40% the previous year because of its zero covid policy and strict requirements for exporters of cold chain products. China’s imports of halal-certified production was especially notable, taking two-thirds of New Zealand’s halal volume for the year to satisfy demand from Muslim communities there. Beef value and volume to China grew to record levels, by 46% and 12% respectively for 2021/22, but a fall in China’s sheep meat consumption led to a drop in total exports. This decline was offset by major gains in shipments to Europe and the US, which imported 62% higher product value to an all-time record level.
Unfortunately the historically high market prices are already in decline because of the economic impact of high energy costs, inflation and continued lockdowns leading to unemployment and lower consumer spending in our major markets.
Despite the unprecedented export value, the actual volumes continued to decline year on year, entirely due to a 10% fall in sheep meat, only partly cushioned by a 1% rise in beef volume. The trend to lower quantities of lamb and mutton is certain to continue in future because of land conversions to forestry, the recent impacts of which have yet to show up in the statistics. Unless current government policy is modified, the priority of incentivising carbon offsets at the expense of food production will irrevocably lead to the death of NZ’s iconic sheep-farming sector.
The annual report does not specifically refer to this particular threat to the industry, but it emphasises the work Beef + Lamb NZ and the Meat Industry Association (MIA) are doing to tackle climate change, both through He Waka Eke Noa and work on a climate change strategy and action plan. This will focus on the sector’s impact on land-use change, promoting the value of red meat as an environmentally sustainable product, and the actions being taken to support emissions reduction. This work will develop outcomes that will target policymakers, sector stakeholders and the public, while ensuring the sector addresses climate change in a scientifically credible way and at the same time ensures its resilience.
Let’s keep our fingers crossed that the government of the day and the Climate Change Commission are receptive to these recommendations. The MIA annual report serves as further evidence proving the enormous importance of the whole red meat sector to NZ’s economic future.