New Zealand red meat sector well-placed to navigate global volatility

Special Agricultural Trade Envoy speaks at NZMB annual meeting

New Zealand’s red meat sector is well-positioned to leverage its strengths and navigate the global volatility, Special Agricultural Trade Envoy Mel Poulton told attendees at the New Zealand Meat Board Annual Meeting.

“While there are risks, New Zealand is extraordinarily placed to harness our strengths, work together and steer our way through the challenges,” said Ms Poulton.

“We need to do all we can behind the farm-gate, across the industry, in Government and through our international relationships to strategically position New Zealand as a solutions partner, with a positive constructive influence internationally.”

The New Zealand Meat Board Annual Meeting was held online on Friday 24^th March.

Ms Poulton recently visited the European Union and United Kingdom on a fact-finding mission where she witnessed a convergence of multiple crises including food inflation, energy and housing, all compounded by the impacts of Russia’s illegal invasion of Ukraine, regulatory changes and severe weather events.

“There are concerns for the future of food security in the EU, particularly among some farmers and industry players. Clearly trade solutions are needed.

“At this stage, some consumers are unwilling to pay a premium for environment and climate credentials, particularly in the EU, but we shouldn’t confuse this with the increasing customer demand for environment and climate credentials. Both environment and climate change are expected to be the next contested spaces in trade.

“In New Zealand, our food and fibre sector drives our economy and significantly contributes to our national climate emissions profile, making it a big focus of government.

“If we get this right, our food and fibre sector could find the sweet spot of being strategically positioned to capture the advantages of addressing climate change. This could have benefits in the marketplace with our customers, when there is a consumer recovery, in trade, and also as a strategic influencer in global food systems policy on climate change.

“Other nations are watching what we’re doing – either way, they will learn from us – we need to get this right.

“Our goal should be to position New Zealand and our food and fibre sector as a trusted and reliable partner on the global stage. We must open and maintain as many doors of opportunity as possible while ensuring our integrity remains uncompromised.

“In order to succeed, we must ensure we stay agile, adaptable, profitable, and flexible. This will allow us to respond quickly to changing market conditions, and build long-term sustainability.

“As we work to solve the challenges facing our industry, we must be careful not to isolate ourselves , create an uneven playing field and make our sector uncompetitive in our global markets.

“It is important to find the strategic sweet spot between having the right regulatory frameworks, being innovative and profitable, and staying competitive in the global market.”

Ms Poulton said that New Zealand’s traditional competitive advantage of pastoral-based agriculture is facing challenges due to increased costs from higher input costs, wages and meeting new regulation - with the cost of production squeezing margins.

“However, we have a powerful strength in the infrastructure of the New Zealand food and fibres eco-system that supports and enables our food producers, processors/packers and exporters to be creative, innovative, nimble, adaptable – successfully navigating international volatility.

“We must ensure that our industry is supported by policies that support innovation and sustainability, taking a whole farm systems approach to environment, emissions and sequestration, production and profitability.”

NZMB chairman Andrew Morrison, whose term ends this week, told the meeting attendees that New Zealand exported $2.6 billion of red meat to the EU, UK and US quota markets with tariff savings of $782 million.

“The Board also has responsibility for $77.8 million of farmer reserves to provide funding to assist in major industry crisis to re-open export markets, maintaining prudent level of net assets to avoid jeopardising quota markets and the integrity of quota management systems, and providing funding for industry-good activities.”

The NZ-UK Free Trade Agreement signed last year presented enhanced opportunities for New Zealand red meat trade into the UK during a transition period of 15 years, he said.

“The Board is working closely with the Ministry for Primary Industries and Ministry of Foreign Affairs and Trade to conclude its preparedness planning in anticipation of the FTA’s entry into force.”

The NZ-EU FTA requires ratification by respective governments and it is hoped this can be concluded for entry into force in early 2024, he said.

Mr Morrison acknowledged MFAT, MPI and the Trade Minister Damien O’Connor for their work to achieve the trade agreements.

NZMB chief executive Sam McIvor said the New Zealand Meat Board balance sheet is strong with net assets of $77.8 million.

A deficit of $4.4 million was reported from reserves management, which includes investment losses from revaluing the portfolio of $5 million and a net $600,000 of interest and dividend income after reserve management expenses.

Reserves management also funded $900,000 of industry good funding for the ground-breaking Informing New Zealand Beef genetics programme in the year to 30 September 2022.

“We’ve sought feedback from farmers on our proposal to fund up to $1.4 million from investment income for industry good funding for this programme for the 2022-23 year.”

The investment fund returned negative 4.1 % after fees and taxes compared to 10.2% in the 2021 year. After fees, tax and inflation, the actual return on the investment fund was negative 11.3%. In 2021, the real return was 5.3%. The Board’s medium term investment return target is 3.3% per annum after inflation, investment management costs and tax.

“The contrast between the two years clearly illustrates the volatility of equity markets over the last few years.”

A highlight this year was the NZMB’s work with US Customs & Border Protection, which concluded with the launch of paperless certification for exporters of US Beef and Veal Quota in September 2022, said Mr McIvor.

“This change has delivered significant time and cost savings and efficiency benefits to quota holders.”

Quota volume amendments to existing WTO quotas have been negotiated by NZ-EU-UK and the NZMB must implement changes effective 1 July 2023.

“This outcome reapportionments the quota splits applied when UK left the EU and will provide improved market opportunities into the EU, particularly through greater beef quota.

“The NZMB has once again provided world-class service to our industry and performed a competent custodian role for industry reserves. Our commitment, as always, is to get better at both of these responsibilities in 2023.”