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Slide in traditional markets

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Richard Rennie
September 24, 2014
The continuing inability of New Zealand to meet and exceed its quota of sheep meat to Europe reflects not only tight supplies from which to draw, but also the shift in focus the rapid rise of China’s demand has meant for the industry. However, processors are unlikely to be abandoning the high value, reliable European markets any time soon. Overall, even including meals eaten out, UK consumers are eating 20% less meat than they were in 2001 compared to 2012.
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The United Kingdom still represents a market for 67,000 tonnes a year, accounting for 16% by volume and 18% of value. Germany, the next largest market, experienced a 3% increase in trade to the year ended March and accounts for 19,000t.

The European markets continue to represent important outlets for value-added chilled sheep meat, reflected in the average price per tonne to China that sits about 40% below European Union returns.

NZ’s ongoing inability to meet its quota allowance, however, speaks volumes about the trend in trade to traditional markets – see Table 1. In 2010 NZ met 86% of its quota, sliding to 73% by 2013.

European markets continue to represent important outlets for NZ’s value-added chilled sheep meat.

Rabobank analyst Matt Costello takes some confidence from signs of recovery in Europe after an extremely tough economic winter, with expectations the slide will be arrested.

Crag Finch, the Beef + Lamb NZ (B+LNZ) regional manager for market development in Europe and the UK, said the coming season was shaping up as a highly positive one after a sluggish 2013 season when the UK continued to wade through its economic problems.

However, it was again unlikely NZ would meet its quota volumes and there was no denying China’s influence on the market’s supply.

“The reality is more product could be sold if we had it, but it’s heading to China. The UK remains valuable for its chilled trade, but there are leg cuts going into China at prices that are palatable to processors.”

Finch said UK importers were not blind to the influence of China, and having that demand competition there was healthy not only for NZ, but for its competitors in the northern hemisphere.

“Collectively, if supply declines, they know demand will follow, so the opportunity is there to co-operate and prevent demand following supply down.”

Meantime, brand awareness of NZ lamb remains high at 86%. In his new UK-based position, Finch is looking forward to implementing some promotions leveraged off an integrated NZ Inc theme. 

This will include promotions with wine makers and labels, and the continuing use of celebrity chef Peter Gordon. 

An announcement is expected later this year concerning B+LNZ joining forces with an iconic and significant NZ company for a joint promotion.

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