Answer for Meat Industry lies in the market

Many farmers may have missed the Meat Industry Associations annual report which Alan Barber points out some significant changes in our meat markets.

Our dependence on the North American market for our beef products is reducing substantially with an increase of selling into Asian countries, and reducing our vunerability to the one main US market.

Similarily with our sheepmeats, where again Asia and the Middle East have become bigger customers, and our reliance on Europe is also diminishing.

But the question still remains,when we have been receiving record prices for our meat products into a more diversified market,why  are farmers still not recieving a sustainable return on their investment.

He explores some of the views of industry participants and discusses the views of James Parsons study of" Supply chain relationships and value chain design".

The Meat Industry Association’s (MIA) annual report paints a positive picture of achievement for the past year in spite of a decline in sales revenue across most products and markets which resulted in an 11% drop from the previous year reports Alan Barber. Critics of the exporters will say this merely emphasises the industry’s failure to build value in the marketplace by competing on price when less reliance on traditional markets and better product differentiation would have cushioned the impact of the global financial crisis. In the first place it’s important to recognise the meat industry actually coped better than many with the downturn in worldwide consumer spending and secondly the effect of our exchange rate which was significantly stronger than the year before, particularly during the peak of the season.

But MIA has justification for being positive about industry performance when a careful study of the figures throws up some highlights of product and market diversification. Dependence on North America for beef exports reduced to 51% by volume and 46% by value to be compensated by a significant lift in exports to Asia especially South East Asia which bought 35% more beef in dollar terms; the Middle East and Asia took more of our sheepmeat at the expense of Europe, admittedly because of the consumer downturn and the high NZ dollar; and co-products remained an important contributor to the industry’s revenue with more than $1 billion sales representing 19% of total sales, despite the fall in demand for luxury goods made from hides and skins.

The pie charts in MIA’s annual report graphically demonstrate the importance of red meat sales which represent 26% of primary sector exports, compared with dairy at 41%, forestry at 17% and in stark contrast wool at only 2%. For those who imagine sales efforts are solely reliant on our quota markets – USA for beef and EU for lamb – a study of the figures is informative: more than half beef sales go to markets other than North America and exactly half of sheepmeat exports by volume to markets outside Europe. The fact Europe still contributes 57% of category revenue underlines the continuing value of this quota – diversification is all very well, but not completely at the expense of profit.

The question no doubt uppermost in farmers’ minds will be why this hasn’t resulted in a sustainable industry which provides an adequate return on their farm investment.   It appears all the main meat exporters have come to a similar conclusion about the need to improve involvement in the value chain, but not necessarily from the same perspective.