NZ Sheepmeat Industry

Competitive position

New Zealand is the dominant player accounting for 54 percent of the world sheepmeat trade in 1999. The history and reputation that accompany the 'New Zealand Lamb' brand provide good long-term prospects for the industry. The areas of competitive advantage over competing sheepmeat supplying countries (mainly Australia and UK) include:

  • An efficient and technologically advanced productive resource base with widespread use of technology tools on-farm.
  • High level of expertise in the areas of breed selection, pasture management, animal health and meat production.
  • Low cost pasture forage systems.
  • High-tech, efficient processing plants with an abundant labour force.
  • Advanced products with a high degree of customer recognition for NZ lamb.
  • Global market penetration with extensive 'in-market' networks in key markets resulting in a dominant trade position.
  • Limited competition from other lamb exporting countries.
  • Substantial 226,000 tonne access to key European markets.
  • Ability to supply populous northern hemisphere markets in their off-season.
  • A recognised and envied food safety system with an excellent record.
  • A good environmental and animal welfare image.
  • Global sheepmeat supply is declining (down 124 million over the last 10 years), reducing the risk of oversupply. On a regional basis, growth in sheep numbers in Asia (India and China) is not likely to pose a threat to established trading nations. The FMD situation in the UK (and possibly the EU continent) has strengthened demand for NZ sheepmeat products.
  • The New Zealand processing sector is in a relatively stable mode with rationalisation taking the form of company mergers and plant/technology upgrades rather than company failures.
  • New Zealand has a valued reputation for providing a broad range of high quality lamb products produced efficiently and distributed via established systems where co-ordination is becoming increasingly apparent. Much of this dominance is built around favourable EU quota access to value markets.

The threat from alternative land use (dairy, deer and forestry) will continue to put pressure on sheepmeat production, however the recent uncertainty over industry restructuring and high capital entry costs (for both dairy and deer enterprises) may slow the pace of conversion from sheep/beef production, particularly if increased lamb prices in recent years are sustained.

Sheepmeat production systems in NZ are well placed to benefit from biotechnology advances and in this respect NZ has a highly respected reputation internationally.

Production and Market trends

  • Lamb (as distinct from mutton) is increasingly a niche product and not considered a mainstream meat commodity when compared with pork, poultry and beef due to the volumes traded internationally. Lamb is at the upper end of restaurant menu prices.
  • The 5 leading international markets for lamb are developed economies with high levels of consumer spending. The growth in consumer disposable income is likely to further enhance the prospects for high quality chilled lamb products.
  • Future competition for NZ sheepmeat exports is likely to come from Australian sheepmeat exports
  • Improving the overall quality of product supplied to the domestic NZ market (the largest market for NZ mutton and second largest for NZ lamb) has increased demand and created higher value with lower transaction costs.
  • New Zealand's sheep numbers have continued their decline despite a return to more sustainable produce prices. For the year ending 30 June 2000 sheep numbers were 44.04 million - down 3.6 percent on the previous year and a drop of 20 percent in the last 10 years. The geographic split between North and South Islands is 45:55.
  • Productivity improvements throughout the 1990's have been significant with the average lambing percentage increasing from 100 percent in 1990 to 115 percent in 2000. Higher lambing percentages and increased average carcase weights have resulted in relatively stable lamb and mutton production levels despite declining breeding numbers.
  • Lamb carcase weights in 2000 were almost 3kg higher than average 1990 levels (a 20 percent increase), while mutton carcases increased by similar margins.
  • Export lamb production made up 97 percent of the total lamb production of 415,000 tonnes in the 2000 season. The 3 percent balance is processed for the local market via abattoirs not licenced for export.
  • Growth regions are the developing economies of China, India and the Middle East while sheep numbers in developed European countries have generally declined (Spain the exception). The growth regions are projected to continue by 2-3 percent annually in line with population growth (FAO), while developed regions are expected to continue the decline in the face of competition from alternative landuses.

Price Trends


  • Price trends for lamb and mutton are rising (in real terms) over the last ten years.
  • A return to an historical average level for the New Zealand currency of around US 50-55 cents still leaves NZ sheepmeat exports internationally competitive.
  • Mutton returns are projected to stabilise following a 10 percent increase in 1999. The gap between lamb and mutton products is likely to widen in developed economies and mutton will continue to be viewed as a low cost protein source competing with low value cuts of pork and beef. That said, mutton has been elevated from a virtual disposal product to now being an important ingredient in further processed products.

Prospects

Market prospects for sheepmeat (lamb in particular) are in the main very encouraging over the medium term with the key fundamentals positive and summarised as follows:

  • EU sheepmeat production is set to decline further, stocks are at manageable levels and pork production is forecast to be lower than previous years. These will combine and provide strength to the EU sheepmeat markets. The FMD situation in the UK has had a significant impact on the EU sheepmeat markets resulting in rapid increase in demand for NZ product on the Continent
  • The WTO decision on the US lamb tariff will encourage further development of this increasingly high value market.
  • BSE is still a major issue in Europe, with consumers looking toward healthy meat options from NZ.
  • The continued growth in demand for NZ chilled lamb items is likely to add further value to lamb returns to farmers. Frozen cuts are also likely to enjoy strong demand from the HRI (Hotel Restaurant, Institution) market sector.
  • Pelt prices have doubled year on year and are set to complement the rise in lamb prices.
  • An export friendly NZ currency (a 10 percent decrease in currency increases lamb returns by 20 percent (M&WES)). Prospects are for the all grade average lamb price to exceed $50/head on a long-term basis.

Potential and existing threats

  • Within NZ the change in landuse from sheep/beef to dairying is a significant threat to future supplies of lamb.
  • Increased lamb supplies from Australia threaten NZ's market dominance however, New Zealand's brand strength, consistent products and quota access advantage will prove difficult for Australia to overcome.
  • Increased supplies from low cost producers Argentina and Uruguay following a transfer of skills and technology from NZ.
  • Food safety issues
  • Rapid increases in world pork and poultry supplies could weaken market prices.
  • A rapid rise in the NZ currency to exceed US 60 cents.
  • Personnel shortages as the industry struggles to attract young people to sheep farming.

The major market fundamentals of tighter supplies of meat proteins, demand strength, favourable trading conditions (both access and currency), combined with established brand strength auger well for the future of NZ lamb in world markets. The challenge for the NZ sheepmeat sector is to provide returns sufficiently attractive to prevent the conversion of land to alternative uses (particularly dairy) and secure consistent supplies.

Previous PageTable Of ContentsNext Page

Contact for Enquiries

MAF Information Services
Pastoral House
25 The Terrace
PO Box 2526
Wellington, NEW ZEALAND

Fax: +64 4 894 0721
Contact this person

 
Print this page Print this page




WebSite survey