In the second instalment of our New Zealand blog, EBLEX/AHDB senior analyst Paul Heyhoe reflects on the fact-finding visit.
Having been back from New Zealand for a week, I’ve had chance to digest what we saw there. During a whirlwind twelve-day trip, I can claim to have been to Los Angeles twice and never set foot outside the airport, as well as visiting Wellington, Christchurch, Invercargill, Dunedin, Napier, Auckland (airport) and many places in between. I can attest to the beautiful landscapes (seen through various plane and bus windows) and fantastic people. However a meeting room in New Zealand looks much like a meeting room in the UK (the same goes for hotel rooms).
Considering we went to see the New Zealand sheep sector, we spent a lot of time talking about China and dairy farming. This really highlighted the fact that we operate in a global climate and the main competition for sheep farming in any country isn’t other sheep industries, but alternative land uses and other proteins.
The other thing that really struck me was the focus the New Zealand sheep industry places on genetics. This was amply demonstrated by the Beef + Lamb New Zealand Sheep Industry Awards, where the categories included prizes for genetic traits such as Facial Eczema Tolerance and Internal Parasite Resistance. The next day a trip to a research farm, run by AgResearch, further reinforced the importance placed on genetics and research, as well as my lack of understanding of this complex subject!
|Paul Heyhoe (left) on the fact-finding mission to New Zealand|
However, as an analyst, it was the insight into market trends that really captured my interest. The world has a huge appetite for sheep meat and, going forward, imported sheep meat will be in demand from a growing number of developing economies. The rise of China has been the big story in recent years, but there remains huge potential elsewhere. Brazil and India are both now open for New Zealand sheep meat and Indonesia is also expected to show some considerable growth. This isn’t a quick process and many years and considerable sums of New Zealand dollars have been invested in trade development – a worthwhile lesson in reaping what you sow.
As these markets grow and develop, the reliance on Europe (and the UK in particular) for leg sales should ease. The UK currently takes approximately 40% of New Zealand legs, but it is envisioned that this will fall to below 10% in the future. EU quota fulfilment is no longer an issue and usage is unlikely to be 100% ever again, but there remains some debate over how this quota is made up and the impact of chilled cuts on the European and UK markets. Overall, it is safe to say the European lamb market is not considered a growth area for New Zealand.
In the short term, New Zealand sheep meat supplies will remain tight – the latest projections are for a lamb kill of 18.6 million head in 2013/14, down 1.7 million head on the previous season. Long term sheep meat production is unlikely to recover significantly as dairy conversions continue. Even if dairying becomes less attractive, the capital invested means that converting back is not possible.