By Sirma Karapeeva, chief executive of the Meat Industry Association.
The red meat sector is well known for expressing itself by way of understatement. So, to hear the past 18 months being described as “tough” really tells you something about the challenging times that both farmers and processors are going through.
The record-high prices for beef and sheepmeat seen over the covid years have come back down to earth as our major export markets work their way through the hangover of fiscal over-stimulus.
Those selfsame post-covid effects are also working their way through the New Zealand economy, with soaring inflation and interest rates putting extreme financial pressure on operators on both sides of the farmgate.
Amid this squeeze, there has been a range of finger pointing and blame finding, most recently directed at the processing industry for allegedly not transitioning up the value chain fast enough to protect farmers from the onslaught of the market correction.
Given the circumstances, this reaction is understandable, but that doesn’t mean it is correct.
The plain fact is that NZ red meat exports have already moved significantly up the value chain, and it is high time we should be recognised for this.
Consider that in 1990, almost half of all New Zealand lamb exports (47%) were sent offshore as a whole carcase. Today, less than 5% of lamb is exported in whole carcase form, reflecting significant investment from processors over many years to capture more value from cuts.
That investment has been steered into people, plant and practice, such that we consistently produce red meat that meets the highest food safety standards anywhere in the world.
This, coupled with our long-term investments in logistics, also means we can put the freshest chilled cuts into over 110 countries and counting, while retaining the ability to dynamically shift volumes between markets to target the highest in market prices.
Within this, the diversity of the industry means that processors are targeting all value niches within these markets, be it as an ingredient into food manufacturing or as a branded product aimed at the end consumer.
Put another way, there isn’t a single part of any animal that comes into our plants that isn’t processed, packaged up, and set to market in the ongoing quest to add value.
As sophisticated as our export-focused model is, it is not immune to the economic forces flowing through our major export markets, be they the United Kingdom, European Union, Japan or China.
Just like here, high inflation has seen central bankers around the world pull the interest rate handbrake, the result of which has been to see consumers cut down on discretionary purchases, particularly higher value items like NZ red meat.
Things may be grim in-market right now, but they don’t last forever. Sensibly processors are maintaining their respective in-market commercial relationships to be ready for when things do turn around.
Consider that China has over 100 cities with populations that exceed 1 million people, and as a red meat producing country we sit on their doorstep. This is a strategic position we should cherish.
Like all systems, though, it can never be perfect, and we acknowledge that there is always room for improvement and cost savings, and that is something that the Meat Industry Association and our members are incredibly focused on.
But I would strongly urge those looking for a scapegoat for the effects of global macroeconomic forces to carefully consider the value-add they already have in hand.
Now is the time for consolidating on the strong and stable platform that we have collectively built over decades, not for chasing value-add mirages that don’t exist.
