Meat does not suffer from currency changes

Press, Volume CXIII, Issue 33158, 23 February 1973, Page 6

Meat does not suffer from currency changes

The indications are that the recent devaluation of the United States dollar and the adjustments in other currencies which have followed in its wake are not going to do much to disturb the serene course of the meat market.

The key to the position seems to be the general world shortage of red meats. An industry executive commented this week that demand was such that those countries with devalued currencies would have to raise their prices to be competitive, particularly with Japan. The first Australian wool sale since the currency adjustments points to an even stronger market for fine wools at least based on Japanese demand—that is on top of a market that already seems too good to be true. The market for coarser wools will be tested out in Wellington today. But the meat industry spokesman agreed that the dairy industry was not in such a happy position. It was in a state of surplus and could be affected quite heavily, but he doubted if the effect would be as great as had been suggested. The meat industry representative noted that the day before the devaluation of the United States dollar the £ sterling was worth 5NZ1.9917. On Tuesday of this week the £ sterling was worth 5NZ1.8258, which was equivalent to a further devaluation of sterling of nearly 10 per cent—sterling was moving in sympathy with the dollar.

While at that stage it was a little too early to have re-established values for the various commodities that they sold, the meat industry man said fhat the indications were that prices would tend to move up to compensate for losses in returns from devalued currencies.

This was indicated by the fact that there had been no alteration in the lamb schedule.

The ewe schedule had been raised. The main market for ewe mutton was Japan and with its much stronger currency now it would be able to match the price levels.

While prime beef prices to farmers had been reduced because of an expected reduction in prices due to devaluation, he said that manufacturing beef prices had not been altered because it was anticipated that values would be able to be maintained. Referring to the probability that countries with devalued currencies would find that they had to raise their prices to be competitive with other markets, the spokesman said that Japan was in a very strong position and could pay higher prices without affecting the internal position in the country, so that it would create very strong competition for the United Kingdom, the United States and Canadian markets. Stimulated by the news media he said that there was a lot of consumer resistance to price levels for meat in the United Kingdom and the offtake had been affected, so it was fortunate that this year a lot of this country’s meat was going to other markets.

Jordan was a new market this year for lamb; a large, tonnage had been sold to Chile; Japan had bought more lamb this year than for many years; continuing large quantities were going to Greece; and markets like Italy, Germany, France. Holland and Switzerland were all expanding. Thus the 22 per cent target for diversification outside the United Kingdom would undoubtedly be achieved this year and many companies would exceed it. Consequently the volume of iamb going to the United Kingdom would be correspondingly lower. The suspension of voluntary quotas on beef imports by the United States was indicative of the shortage of beef—it was short throughout the world—and the suspension of quotas

did not mean that any greater quantity of beef would be going to the United States because of the demand from Canada, the United Kingdom and Japan, which were matching or bettering American price levels.

The day when the United States was the main market for beef had gone. New Zealand was now selling beef to other markets in big quantities. The United States was “not calling the shots.” It was having to match the prices of others, but it was certainly still by far the biggest market for manufacturing beef. The United Kingdom had been a big buyer of prime beef cuts this year. Japan was also buying quite a lot of beef, including prime beef cuts as well as manufacturing beef.

The representative said, however, that all products were at prices on the export markets that could be regarded as being dangerously high. The danger was not so much in the short term as in the longer term. There was likely to be a great upsurge in production as a result of the present levels of prices, which could result in surpluses and eventually lower prices.

“I think that it would be fair to say that for most commodities we do not expect a return to the old levels of 12 to 18 months ago. We are on a new plateau of prices, but this doe’s not mean that they will stay at these peak levels. The higher prices go the greater the risk is of a sudden decline ... it is an unstable situation.”

The spokesman said he did not think that currency adjustments were at an end yet. The yen was still floating and it was his opinion that it might continue to float until about Easter. At that time its value might be pegged again and when its value was established Australia might revalue further and at that time New Zealand might find it very difficult not to follow Australia. In the next few months he foresaw that overseas earnings would be pouring into New Zealand and such a surplus of funds would build up that there would be an increasing likelihood of revaluation.