The Press FRIDAY, AUGUST 6,1971. Mutton to Japan

Press, Volume CXI, Issue 32678, 6 August 1971, Page 8

The Press FRIDAY, AUGUST 6,1971. Mutton to Japan

Faced with the second increase in freight rates this year, Japanese mutton importers are holding urgent talks with the shipping lines trading from New Zealand and have threatened to use their own or chartered ships if the 20 per cent increase set down for September 1 is not reduced. Such a strong stand by importers of New Zealand products against increased shipping costs is unusual. It comes about because most of the mutton sold to Japan is exported “f.o.b"; the importer pays the freight, and until current contracts expire at the end of the year any increase in freight charges will have to be met by the Japanese meat processing firms. Meat sold in most other New Zealand markets, including Britain, is exported “ c.i.f. ”; the exporter pays the freight and the importing country has less incentive to assist in reducing the freight bill. New Zealand cannot be indifferent to this particular quarrel about freight rates merely because the outcome, for once, will not affect this country’s earnings. Japan is New Zealand’s biggest market for>mutton and bought 67,000 tons last year, about two-thirds of our total mutton exports. The meat is processed in Japan and the freight bill is a substantial part of the importer’s costs. Other meats, including horse meat from Latin America, might be substituted for mutton if the price rises. The alternative, a lower return to New Zealand producers, is hardly to be contemplated; it would probably not be economic to slaughter the stock in New Zealand.

In practice, if the freight rate increases 20 per cent, mutton will cost almost a cent a pound more to land in Japan; this would all but eliminate the benefit of a drop of 1.5 cents a pound in the duty on Japanese mutton imports which came into effect last April. Where the waiving of the duty might have meant a slightly higher return to New Zealand producers, or at least an increase in sales, the freight rise will mean that any further increase in costs might make the export of mutton uneconomic for New Zealand producers unless the Japanese processors raise the price of their products to consumers, which is something quite beyond the control of New Zealand.

The prospect of Japanese importers’ using their own ships to carry the mutton is less attractive than it sounds. Although the trade was begun about 12 years ago using small, refrigerated whaling vessels under charter, trade in general between Japan and New Zealand has grown to the point where the regular service provided by the members of the New Zealand Eastern Shipping Committee is needed; mutton, as one of the largest cargoes carried, is important to the operation of that service. The Japanese are not being entirely fair when they blame waterfront delays in New Zealand for the increase in shipping costa; landing and storage costs in Japan are also rising sharply.

Alternative markets for mutton would be hard to find. Britain, the next largest buyer, took only 20,000 tons last year, and only Hungary and the Soviet Union also took more than 1000 tons. Improved handling methods and a quicker turn-round of ships in New Zealand ports might help to keep the trade viable for a time; in the long run only an established preference among the Japanese public for muttonbased processed meats can ensure the future of sales from New Zealand if freight costa cannot be kept stable.