By Sirma Karapeeva, CEO Meat Industry Association
This speech was given at Diplosphere panel on Inflation, Food Insecurity and the Coming Global Food Order, 22 August, Wellington Club
Thank you to Maty and Diplosphere for organising another very current and topical discussion tonight.
As always, Maty has posed us a set of comprehensive and wide-ranging questions to inform the discussion on global inflation, food security (or insecurity) and the new global food order.
Today I’m hoping to provide some insight from the perspective of the meat industry and as a representative working in the food industry.
Firstly, a little about the Meat Industry and why we have a perspective on this topic.
New Zealand’s sheep and beef processing industry was established and continues to be strongly export focused. We export more than 90% of domestic production to over 108 countries worldwide.
Our meat companies rely on the network of NZ trade agreements as well as their strong commercial relationships to reach consumers from LA, to Shanghai.
The industry is built to the model of breaking down carcasses and matching meat cuts and products to different consumers so as to maximise the value of each animal and earn important export dollars for our farming communities and for New Zealand as a whole.
Of course being an export-focused industry means that we are often at the mercy of global events, both positive and negative.
Over the last few years we have benefitted from strong global demand for protein and strong global prices. For the 12 months ending June 2022, we exported over $11 billion worth of product making us the second largest goods exporter in New Zealand.
We also faced some significant challenges including Covid lockdowns, shipping and logistics disruptions, labour shortages and having to quickly shift products between countries and between channels (e.g. from food service to retail and on-line).
To a great extent, our companies managed to navigate these challenges well and kept up production and exports when many others suffered. And we have seen the value of our exports grow.
Covid has accelerated a number of emerging trends in the food industry and increasingly we’re seeing our consumer prioritise things like:
Environment and sustainable packaging,
Health and wellbeing
Convenience
However, before I talk about the opportunity that this present for our companies, it is worth noting that all these trends are overlayed with the reality of inflation – and the meat industry hasn’t been immune to impacts of inflation across our supply chain.
We have already seen a significant increase in production and export costs. For example container costs have increased by some 400%. And on top of that, the shipping disruptions have meant that companies have had to “devalue” some of the product offering. For example, the UK is our largest and most lucrative market for value add chilled lamb exports particularly around Easter and Christmas. However the shipping disruptions and the uncertainty of getting a perishable product on shelves in good time has meant that companies have chosen to export frozen product at a lower value. In March we saw our chilled exports to the UK drop by 80%.
Production costs are also on the rise with sheep and beef farm input prices increasing by 10.2% in the year to March 2022. And in addition to the rising cost of farming inputs, compliance costs to meet increasing regulatory requirements around for example, environment, are also on the rise.
Cost increases are also being felt in other areas and like in New Zealand, many countries around the world are facing a cost of living crisis with high food prices and limited supply.
Consumers are tightening their belts and shopping for cheaper products and cutting back on discretionary spending like restaurant meals. This will likely have an impact on our exports both in terms of the retail product offerings and also the foodservice channel.
In simple terms, despite the strong global prices, it is likely that it will become harder to capture that and pay farmers and suppliers the high prices they expect for their stock. And without some of that money circulating in the economy, there is potential for rural communities to feel the pinch.
The red meat sector accounts for nearly 5% of national employment and contributes around $12billion of GDP (or around $3,000 per household in New Zealand). So you can quickly see the cascading impact of inflation and tightening of consumer spending in overseas markets.
On the flip side, many of the pillars that make up the global new food order, namely: healthier lifestyles; concern of the environment and globalisation of tastes, could significantly benefit our red meat exports.
We have a very unique product to offer – natural, grass fed red meat which has been proved to be both better for you and better for the environment (as compared to red meat from other countries).
The Pasture Raised Advantage research programme has already shown that the nutritional composition of grass fed red meat is superior to that of grain finished meat and plant-based alternatives. The amino acids from red meat are of greater biological value and better absorbed by the body. This bodes well for consumers that are looking at healthier lifestyles and are looking for ways to make their money go further.
It also bodes well in the context of food insecurity where people are looking for nutrient dense food that the Riddet Institute has shown that animal protein is exactly that.
AgResearch have also shown that New Zealand is also very environmentally efficient compared to other countries. The carbon footprint of sheep and beef production (on-farm Life Cycle Analysis) is estimated to be around half the average figure globally (and that takes into account shipping to offshore markets).
So for consumers that are looking for red meat with strong environmental credentials, they should look no further than New Zealand beef and lamb. And as a sector we are committed to continual improvement, including becoming carbon neutral by 2050. The HWEN process which is looking at pricing on-farm emissions to support that goal is a world first and a further show of the real commitment of our farmers and grower to world leaders in this space.
We have a lot of pluses on our side of ledger. The trick will be to tell our story well and to capture the hearts, minds and dollars of the decerning customers worldwide. We will not be able to feed the world, but we can feed those that are seeking out a natural, healthy, high quality premium product.
Thank you for your attention.
The views expressed in this article are the author's own and do not necessarily reflect Diplosphere's stance.