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Allan Barber says that while new trade agreements are encouraging, the reality of red meat marketing isn't positive at present. But if you look hard enough there are positives if you have a longer perspective

Rural News / opinion
Allan Barber says that while new trade agreements are encouraging, the reality of red meat marketing isn't positive at present. But if you look hard enough there are positives if you have a longer perspective
cattle in grass

The outlook for agriculture and the economy in general appears pretty gloomy at the moment and positives are in short supply, although there are some green shoots starting to appear if one looks hard enough. Any improvement is unlikely to happen before next year at the earliest, but it will surely arrive at some point, when the cycle turns.

Interestingly the latest quarter’s Rabobank farmer confidence survey reports farmers’ faith in their own business prospects has improved markedly, although confidence in the broader agricultural economy has fallen. Unsurprisingly sheep and beef farmers were the least optimistic, but even their confidence level had improved significantly, possibly because of better beef returns. Dairy farmers and horticultural growers both showed positive results, although the drop in the latest GDT auction came after the survey, while anecdotal evidence suggests grower returns are insufficient to cover production costs.

ANZCO’s Rick Walker’s latest market update points to some positives in UK and US lamb and beef sales. Domestic lamb supplies in the UK have become very expensive which has resulted in supermarket chain Morrisons backing away from its 100% British lamb stance, a situation which is likely to persist for quite some time. Lamb sales to European countries have also shown signs of improvements in price and volume, while the American market is holding up well, except for some resistance on French racks, traditionally the highest priced cut.

Beef + Lamb NZ underlines the continued support by the UK’s “big four” retailers for New Zealand lamb which provides a competitive alternative to UK production at different times of the year, particularly the May/June period when the price differential is at its greatest. However the UK only takes about 10% of our production which is too small to influence returns to farmers very much.

Unfortunately China and Japan are proving challenging, with little probability of an improvement until next year at the earliest. China which has become both the largest market for New Zealand sheepmeat as well as the main destination for lower value cuts remains depressed in both retail and foodservice. B+LNZ cites competition from Australian sheepmeat and domestic Chinese pork production as additional negative factors. This means achieving a satisfactory return across the whole carcase is proving difficult as long as these headwinds persist.

The UK FTA has produced some promising signs for premium beef sales, while the USA has a supply shortage of domestic cattle which indicates strong demand for imported product, particularly lean cow and bull. Enquiries from US buyers for premium grassfed beef cuts are also at an unprecedented level in a market which has traditionally favoured domestic grain fed product. The prices from these other markets, especially the USA, have served to compensate for the downturn in demand from China which suffers from competition from Brazilian beef as well as the depressed state of the economy.

The most encouraging signs for the future come from the progress being made with various trade negotiations. Trade Minister Todd McClay has made a commitment to concluding an FTA with India which would appear to be overoptimistic, unless he is willing to accept a less ambitious agreement that recognises India’s refusal to include dairy and other off-limit items. The Australian FTA is an example of what is possible as distinct from ideal, but encouragingly it removed a 30% tariff on sheepmeat as well as making tariff reductions on horticultural products. It also contains provisions for technical assistance and greater access for study and work visas which reflect India’s desire for agreement beyond trade purely in goods and commodities.

Another FTA under negotiation is with the United Arab Emirates with which McClay has developed a very good relationship as a consequence of his time as Vice Chairman of the WTO ministerial conference in Abu Dhabi in February. While a broader aim is to revive an agreement with the Gulf Cooperation Council, the agreement with UAE for which round one has been launched will be an important stepping stone.

The CPTPP currently has 11 members, but the UK is going through the ratification process by all the members after it was accepted as the 12th member in July last year; at this point only Japan and Singapore’s parliaments have formally ratified UK membership, but there are no obstacles to ratification by the other nine. China has applied for membership, although there appear to be several reasons for this to take quite some time to achieve. New Zealand’s FTA with China makes this less of a factor for New Zealand exporters.

Despite CPTPP provisions for tariff removal on 99% of goods between all member countries, New Zealand is currently in dispute with Canada which has blocked dairy imports in spite of the obligation to provide limited duty free quota access for most dairy products. The arbitration panel has found comprehensively in favour of New Zealand without any apparent movement by Canada.

The other high quality agreement concluded in the past year was the NZ/EU FTA which entered into force on 1 May 2024, providing for duties to be removed on 91% of New Zealand exports immediately, rising to 97% after seven years. This FTA famously failed to negotiate anything like the desired access for beef and dairy, but in other respects it achieved good outcomes for our exporters.

New areas for negotiators to explore, rather than trying to expand geographically to countries like the USA which appears to be withdrawing from concluding new trade agreements, include digital trade across borders which will reduce the business costs for exporters and importers.

New Zealand has a comprehensive suite of trade agreements with many countries throughout the world which are critical to our economic performance, but on their own they cannot guarantee prosperity. This requires a great deal of initiative to ensure we provide what customers need and want, taking advantage of the hard work of our trade negotiators to be ready when the upturn comes.


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5 Comments

Even if we can get an agreement with India to take our sheepmeat  without dairy, would be an achievement. And I am sure there is other stuff we can trade.

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Goat ?, though I would say they would be hard to compete with.

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Some of my senior staff went to a IOD meeting month ago with a top Indian diplomat/trade person talking.
Made it very clear Dairy is a no go, meat maybe, but very interested in wood as they need a lot of building. Time will tell.

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Yeah I have always thought it was silly to try and include dairy in an agreement with India. Any sales person knows that getting a sale over the line is what's important.

Lets hope the timber trade takes off.

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And what to we buy off India as a trade ?

I've always thought India could provide a solution to our supermarket duopoly, through the many dariy and small grocery owners here. 

 

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