MEAT BOARD REPORT Findings Critical Of Lamb Payments

Press, Volume CIX, Issue 32114, 9 October 1969, Page 1

MEAT BOARD REPORT Findings Critical Of Lamb Payments

(New Zealand Preet Aeeoctatton) WELLINGTON, October 8. The market outlook for New Zealand lamb early this year i was strong enough to justify a higher offering of schedule prices ; to producers than that set by the meat operators.

This is stated in a Meat Board report of an inquiry into the 1968-69 marketing season, released today by the board’s chairman (Sir John Ormond). An analysis of the prices paid and the price levels which prevailed in the United Kingdom showed a differential about 3c per lb over the schedule, the report said.

At times the differential during the season was as high as 5c per lb “and could have been higher.” At other times the gap closed to less than jc per lb “and could have been lower.”

“The fact that Producers’ Meats has already announced a payment over schedule of 61c a lamb (about 2c per lb) fully supports the results of the calculations.” The report said that In essence the question which had been asked, and on which a clear statement was required, was:

“Did the pattern of the carcase lamb schedule as set by the meat operators in the 1968-69 season form a reasonable reflection of the forward market information they could have expected to have in frpnt of them at the time of setting the schedule?” Sir John Ormond said the main conclusions reached in the study were: As much as half the differential can be accounted for by fortuitous circumstances in three separate periods during the season, which could not have been reasonably forecast. It did appear that from late January onwards the operators pursued an “unduly cautious and pessimistic” assessment of market prospects. It was not an acceptable de-

fence to say fanners could have disposed of their lambs other than through the meat export operators.

“The operators are the experts in the business of marketing lamb. The producer has a right to expect that the schedule they set is reasonable and fair,” the report said. New Zealand lamb sold In the United Kingdom was 8788 per cent'of the 196869 season’s production.

Prices received by exporters for the remaining 12-13 per cent, which includes the Devco procurement for North America, were in a free market situation, also a reflection of the level of demand on the United Kingdom.market. This reflection was tempered by the level of the market diversification percentage required by the Meat Board, and the level of the market development levy imposed for non-perform-ance. Unforeseen Factors Situations developed during the year—severe congestion and long delays in London and Liverpool, creating an acute shortage and scarcity prices for a month longer than expected; the poor lambing and late spring in Britain which reduced the home kill available; and general uncertainty after the British Government’s decision on importing meat from foot-and-mouth disease prone countries. Each of these factors had a material effect on raising price levels, said the report. In each case the degree to which New Zealand lamb would be affected could not reasonably have been foreseen. Risk Element The relationship of New Zealand killings to marketing in Britain was not generally appreciated—a peak of killing in New Zealand in December and January is spread over a 12-month marketing pattern in the United Kingdom. The report said there was a large element of risk in forecasting price levels in the British market up to six months in advance.

“At the same time the large meat importing firms in the United Kingdom, with the exporters in New Zealand who are responsible for setting the lamb schedule, have a long experience in forecasting future market price levels for lamb against the complex background of the United Kingdom meat market” A detailed analysis showed a differential about 3c per lb over schedule, but the report said these calculations assumed the disposal of the

full season's production in the United Kingdom.

It was also assumed that, as in previous years, 20 per cent was sold by producers on owners’ account, through company pools, producers’ cooperatives and other such outlets. No allowance was made for the effect of the lamb diversification levy. No proof was produced to show that in setting the schedule operators made allowance to cover the levy. “Nevertheless, it would be logical to assume the great majority of lamb sold outside the United Kingdom had been sold at prices, on average, lower than those ruling on the British market,” the report said. “This would marginally reduce the calculated average differential of 3c per lb over schedule.”