Silver Fern Farms Airfreights 90 Tonnes of Chilled Meat to UAE Amid Freight Disruptions
Silver Fern Farms has successfully produced and delivered 90 tonnes of premium chilled New Zealand lamb and beef to the United Arab Emirates via airfreight.
Rabobank’s animal protein analyst Matthew Costello says weaker Chinese demand for forequarter cuts is affecting returns.
In his report ‘New Zealand Sheepmeat: Maximising the Cut – Breaking It All Down’, Costello calls for greater access for premium chilled lamb cuts in China.
Costello says it is important for producers to understand the breakdown of the animal and market demand for specific products as this ultimately determines the farmgate price.
“While farmers are paid on a per head or per kilogramme basis, the price they receive is calculated from the summation of all the products derived from the animal – the extensive array of cuts, the offal, co-products, skin and wool,” says Costello.
He notes that in examining the values of the different sheepmeat products it is apparent the fall in lamb and mutton prices during the 2014-15 season has been largely attributable to weaker Chinese demand for the forequarter cuts, which account for nearly a quarter of returns from the carcase.
Co-writing with several partners in the Red Meat Profit Partnership, Costello previewed the key findings of the report at farming events nationwide attended by about 1000 farmers.
The Rabobank report says understanding the demand for different parts of the animal, based on the product and its intrinsic demand, is paramount as it ultimately determines the overall profitability of the sheepmeat sector.
“Not only is it important for the producer to understand the demands of the customer from both a carcase production and by-products viewpoint – so they can supply stock to those market specifications – it is essential this understanding is held across all sections of the supply chain,” Costello says.
“For example, processors need to communicate transparent pricing signals and market information to producers, while the Government needs to continually work with producers and processors to capture new markets.”
China exploded onto the NZ sheepmeat export scene in 2013, to become the country’s largest sheepmeat trading partner.
In 2014 China accounted for about 40% of our total shipments, on the back of growing per capita consumption and stagnant Chinese sheepmeat production in the seven years to 2013.
“However, recently China – the world’s largest sheepmeat producer – has ramped up domestic production to eight times that of total New Zealand production,” he says. “This and record imports from NZ and Australia has created oversupply in their market.”
Costello says despite the short-term oversupply problem, growing demand for high-quality, safe and traceable lamb and mutton will ensure China remains a key destination.
In light of this, gaining access for premium chilled lamb cuts in China should be a priority for the Government and industry in NZ as it would allow the higher-volume, lower-value cuts to be complemented by higher-value product destined for the high-end restaurant and food service channels.
The European Union, particularly the UK, remains a key destination for NZ’s higher-value sheepmeat exports, but sluggish consumer demand has hit returns.
Costello says higher production in the UK, combined with stuttering economic growth and a stronger British pound vs the euro, has seen demand wane in the UK – particularly for lamb legs.
“This has had a considerable impact on farmgate returns here in NZ as leg cuts account for around 32% of the returns generated from the animal.”
Costello says though domestic producers will continue to benefit from the long trade history with the EU and market opportunities in China, it is imperative the NZ industry keeps looking for new market opportunities.
“With around three-quarters of our exports destined for these two markets, it makes us vulnerable to market variables, particularly as both are large producers of sheepmeat,” he says.
Further industry collaboration will be key in exploiting new opportunities, Costello says, with markets such as the Middle East having “huge potential for our sheepmeat sector here in New Zealand”.
“This is demonstrated in the strong trade the Middle East holds with Australia as the largest export destination for its lamb and mutton.”
