Part three of Allan Barber's perspective of the New Zealand meat industry. The need to find points of difference that motivate consumers will become the key to future properity

Part three of Allan Barber's perspective of the New Zealand meat industry. The need to find points of difference that motivate consumers will become the key to future properity

By Allan Barber*

This is the third part of a presentation I recently gave to a Beef + Lamb Field Day about the meat industry. The first part is here, the second part is here.

The future

There are two diametrically opposing views on the meat industry’s future outlook: either the world is short of protein and has an insatiable appetite for what we produce, or meat will be replaced by artificial or synthetic proteins, much cheaper and easier to produce.

I can’t predict just where on the continuum between these two extremes actual reality will settle or which direction the trend will move.

But it’s probably worth hazarding a guess that the top end of the market will continue to prefer the real thing, produced and presented to a high quality, while the poor who are unable to afford much if anything will be happy to accept the cheaper, artificial version. It is also quite possible the increasingly global craze for fast food, especially hamburgers, could be met by synthetic beef, but here again there would be a premium end of the market demanding the real thing.

This suggests that there is a future for farmers, processors and marketers, but it will require a move away from the commodity end of the supply chain. I am not about to speculate on the future demand for dairy products, but one scenario would see cull cows becoming an unwanted by-product of the dairy industry, instead of a profitable input to the meat industry.

This would present an opportunity for sheep and beef to reassert itself as a profitable, premium farming activity, but it ultimately comes down to finding market niches instead of supplying a commodity.

For example, Coastal Spring Lamb, starting small and supplying Foodstuffs, has now combined the lamb production from 11 farms around Whanganui for export to Vietnam, Thailand and other Asian markets. They have successfully marketed their brand to chefs in top restaurants, starting with spring lamb from five farms, but have now expanded their supply to the extent that they can maintain regular supply of lamb, not just spring lamb, for most of the year. This is frozen product, shipped in containers, which gives the lie to my statement about frozen product not being able to command a premium.

This arrangement underlines the need to find a processor that is prepared to pay a premium for the lamb that meets the specifications, but it also indicates the difficulty of developing niche products that can extract meaningful premiums. Undifferentiated products will remain directly exposed to price and demand volatility.

The main opportunities rest with lamb and prime beef which can be targeted at the chefs of high quality restaurants in carefully selected markets. Unfortunately there will only ever be a relatively small proportion of our production output that can be guaranteed to meet the specifications of timing, weight and eating profile of those niche markets. There will also be opportunities for top class wool to be used in highly priced clothing and textiles, while co-products for sophisticated medical applications and health benefits can earn good money.

There remain a larger percentage of products that will inevitably come on stream during the peak of the season, whatever the impact of climate change is on our seasonal production patterns. There will be demands on farmers, as usual, to cope with these climatic conditions and to have sufficiently robust and flexible farming systems to respond to the needs and economics of the market. This will put more pressure on farming expertise and scientific input into genetics and pasture types.

Meat companies will also have to be efficient, responsive and flexible in their processing operations and marketing strategies. Those that fail to keep up plant reinvestment programmes will fall by the wayside. Government and trade negotiators must continually achieve the best possible trade agreements and our food safety and biosecurity authorities must ensure credibility of farm and plant licensing so that our trading partners accept New Zealand’s systems as meeting guaranteed food safety standards.

I believe our food safety and animal welfare standards will become a major point of difference for New Zealand meat exports.

In summary, an industry which has now produced a massive part of New Zealand’s overseas income since 1882 has challenges, if it is to continue exerting such a large influence in future. But I am confident the broader meat sector, farmers, scientists, processors and exporters alike, will innovate and achieve success in the future with a high quality, differentiated product.

There will be major challenges in handling climate change, environmental standards, sustainability issues, pasture growth, animal health, antibiotic and chemical resistance, food safety demands and addressing the question of whether New Zealand adopts GM or not.

It will be an exciting journey.

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*Allan Barber is a commentator on agribusiness, especially the meat industry, and lives in the Matakana Wine Country. He is chairman of the Warkworth A&P Show Committee. You can contact him by email at or read his blog here ».

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So what have or highly paid meat company executives and industry leaders been up to all this time? Isn't all of that stuff totally obvious?

I see beef and lamb NZ are talking up a new promotion strategy to boost marketing and tell "the NZ Story" with....drumroll please....$5m. This is a $9b industry and all we can scrape together for marketing is $5mil. Given that amount is now going towards subsidising promotion for majority foreign owned companies you wonder why even bother at all? They'll capture the gains further down the supply chain and feed us peanuts.No wonder the latest MPI report shows red meat earnings declining over the next 4 years.

Fools. Fools they are. Fools they make us.
These guys still think that nipping down to Cowcross they will find a buyer on the floor of the Blue Post.
Living in the past.
Still dreaming of days when quota sold itself.
Though the breakfasting was lendary.

Small Basis Correction in an Ugly Down Week

It is the final day of what has been a week marked by surprising weakness. Monday’s unexpected limit-down move was followed by a fed cash cattle market that weakened what seemed like hourly.
As cash declined, live cattle futures managed to find support near the May lows and scrambled 270 points from yesterday’s low to today’s high before backing off once more. With cash prices $6-8 lower than a week ago compared to Aug LC currently $4 below last Friday’s close, basis has finally made a move to narrow.
The most disheartening aspect of this week for the cattle feeder is the inability to trade volume at any given price. Packers have bought a few hundred then backed up repeatedly. Understandably, it has been difficult for cattle feeders to assimilate how fast prices have melted down, which has stymied decision-making. There will be some cattle carried over into next week, when the prospects don’t necessarily look much better.

As tough as some of your posts are to read Andrewj, it looks like a slow motion train wreck that will hit the NZ Beef industry from 'out of nowhere'.
What can we Beef farmers do ? Hedge FX or something ? Sell 350 breeding cows while the $'s are high and wait it out ?

There arent a lot of options. Other than tweaking what you do. Selling all excess animals while the schedule is good. Upping the ewe numbers a little while the entry level into those were poor. Milk powder and meal is cheap, so the entry into beef numbers is reasonable assuming one doesnt go silly when buying the calf. Doing what you do well and keeping control of cost. And what will be will be. At least you arent out there paying $1000 for weaner steers coming off the back of losing dairy grazing...

Belle - interesting comment re dairy graziers. The loss of dairy grazing to the graziers is very substantial in financial terms to some. Part of the collateral damage the dairy prices are causing, but one which we see very little of in the msm.

Whats happening down your way Cas Ob? I am a bit out of the loop at the moment. Havnt been to the saleyards for a while to catch up with everybody. Doesnt seem a lot of point. Store stock is snapped up at crazy prices...what there is available...quite a shakeup in the rural territories. I do know of a small number of dairy farmers that have or are heading to beef farming.

I hear southern banks are putting farms on the market (slowly) and some farmers being told to sell their cribs (baches/holiday homes). It appears it is the multi farm/recent conversion folks who are being dealt with first. No surprises there. I know a couple of farmers who came to dairying in the latter years, some who converted, who the chaps are now back in the paid workforce as bankers or advisors etc while the wife is now running the farm.

Some dairy farmers have been selling their culls to farmers up here in Central who don't have grazing stock. We have good grass cover and good conditions down on the farm. Some may have milked a bit long and don't have the cover. Ylg dairy hfrs are sellling for around $550 - but they have to have some decent figures behind them to sell at all. MA dairy cows $1100-1500 depending on records - hasn't really shifted much in the last few months. Not sure where beef is at at present. Hope to go to a Central grazing field day later this month.

There's been quite a lot of feed for sale. Including some lifted fodder beet - one guesses it is from graziers that have had grazing cancelled.

The biggest issue for Southland farmers at the moment is the Regional Council's Water and Land 20/20 plan that has just being notified. A lot of their rules/policy seems to be based on physio-graphic zones. No other council has yet used this as a basis for regulation. Two zones will see a complete ban on conversions and some potentially a ban on winter grazing. It appears dairy, at 35% of pastoral land use in Southland, is expected to solve all the water problems. ;-) Any land above 700m can't be cultivated - don't expect that will go down too well with some intergenerational farming folks. Just started reading through the 209 pages of fine print. :-)

Our beef has a big market in China and they seem willing to keep paying us decent money.

From Alliance

China has been a very reliable trading partner for 2016 and has widened the range of products it can now accept for domestic distribution and consumption. Indonesia has been intermittently competitive on pricing but only at periods where the tightly controlled New Zealand and Australia quota has been released to importers. Other North Asian markets have generally been flat- reflecting the subdued state of their economies and prohibitive import tax rates on NZ beef.

I was at a bbq a couple of weeks ago. Everyone brought lamb chops. I guess cause they were a cheap option. But also once we girls started yakking about it I was horrified to learn that none of them liked lamb chops and they hated cooking them. Taking them to a bbq was their way of getting out of cooking them but also keeping the blokes happy. Thankfully the boys tucked in heartily. My faith restored in the meat eating human.

Belle, I talked to my son in law from Texas and he is back buying beef again as it's so much cheaper. He got 31/2 pounds of prime steak for $20.
The lamb job worries me lots. Talked to a local farmer who is now trading over 12,000 lambs, keeps them all the way to October for the UK X-mas market, all rams. 12 month ram lambs must be up there with camel meat and possum, what farmer eats his own 12mth ram lambs? Makes a nonsense of all the marketing and my 4 month old prime spring lambs, straight off mum I sell to the same market for the same price. Makes it hard for me to take lamb marketing seriously, just a bloody joke and an insult to farmers like us.
Then when you look at the most successful product, bull beef, it required no marketing, has controlled quota access to the States, been a winner for 50 years, straight commodity, but Brazil has the same 95Cl beef.

Then marketing is so easy today ;-)

Have a play

How much does the growth of livestock finance affect store prices?

and on and on if you get my drift. Financed mostly at around %10 except the works finance at %7.8 which is far too close to what I borrow from Rabo secured ( my bugbear at present).

In fact here is our marketing dollar in action, just ring Wendy

heres a guy onto a winner, NZ ??

Want lamb?

I think Alibaba just solved all our marketing problems, either that or it's a race to the bottom.

Oh dear...regards the ram lambs. Now you mention it, its probably been a ram chop that put the girls off. Had one myself at a rather well respected restaurant a while ago. The despair. Its well past time ram lambs had a time limit. Maybe jan 31st. Will read your links later.


Cash Cattle. There can be situations when the news is so bad and the markets so trashed as to prevent any possible constructive news from entering the marketplace. This could be one of those times. Futures are targeting a cutout value well below $200 in the nearby future. Cattle owners loaded their show list last week and may again this week. Futures crashed last week and are beginning this week in the same mode.
This past week was a rout in the cash markets for cattle. The industry expected a deeply discounted board to rally to meet a cash market trading at large premiums of up to $10 in early to mid June but instead watched the collapse of the markets as both futures and cash tumbled and tumbled they did. Last Friday brought no respite to the week long carnage. As sellers loose confidence in the market, they become willing sellers -- not hunting for a better price, just a bid. The first trades on Monday of last week in Colorado at $125 were soon followed by trades at $123 in Kansas then $121 in Nebraska and finally some $119 in the north late week. Dressed prices were little different falling from $200 to $198 to $196 to $194 and even $192 late. Packers are well schooled in lowering bids and sensing leverage in the market, they are capable of capitalizing on the moment and opportunity -- putting most of the fall in prices into their pocket.

Another Limit-Down Monday

Was at a Queenstown conference dinner recently. They served (among other offerings) merino lamb - cooked to perfection. Around 300 diners. Most of the attendees were from out of town. Had some folks ask me afterwards where they could buy merino lamb. It's not that mainstream when you start to look for it to buy.

Try the Cromwell Butchery, or the Cardrona Merino Company, which is a farm that sells it's own meat, and also goes to the Cromwell Market.