U.K. lamb market crisis

Press, 25 February 1977, Page 15

U.K. lamb market crisis

If there is one thing about prices for farm products it is there uncertainty and unpredictability. The big and sudden decline in the market for our lamb in the United Kingdom — reported to be as much as 14c per lb in only two weeks — is the latest development in the continuing story of price and market fluctuations. Much of the responsibility for the crash in prices has been put on the load-out ban on meat exports imposed by the Meat Workers’ Union late last year, with its resultant effect in “bunching” the arrival of ships with lamb in the United Kingdom. It seems that the decline has been triggered Off not so much by the quantity of lamb actually on the market at the time, but by the expectation of heavy arrivals in the near future. The point was made at the time of the union action that this could be an outcome. New Zealand, its meat exporting companies and in the final analysis the farmers are going to have to pay for this piece of industrial insensitivity. But Mr J. B. Falconer, the chairman of the Dominion meat and wool section of Federated Farmers, asked a good question this week. Because it was widely foreseen late last year, why was not action taken then to reschedule lamb arrivals in the United Kingdom to avoid a glut. It could be that this is easier said than done. In fairness to the freezing workers, however, it is likely that there is more to this situation than the. load-out ban and the consequent bunching of supplies. Prices for some months now have been at record levels because of a shortage of New Zealand lamb, and it is an old truth that the higher prices go the further they have to fall

when inevitably the crunch comes.

The British market normally reacts to the weight of lamb starting to arrive at this time of the year. The reaction has just been so much more marked on this occasion. The Meat Board rates as one of the most popular producer boards among farmers. In recent years it has seemed to have the capacity to act with strength in a situation of crisis and it has not been afraid to resist political pressure if need be. It has, with considerable skill, shielded beef producers from the worst effects of the downturn in prices for their product in the last year or two, although there have been understandable side effects, like the “bunching” of cattie reaching the freezing works that could not have been foreseen, or not much could have been done about, because farmers reacted in particular ways to price prospects. But on the whole farmers have benefited. In its latest move to set up a trading company in the United Kingdom and to buy in lamb if necessary on that market to stabilise prices there, the board has taken one of its boldest and most audacious steps yet. It would seem to be a considerable concession that the United Kingdom Government has allowed such an intervention, in what might be regarded as its own nock of the woods. It could be claimed that putting some stability into the market is in the longer term in the interests of the United Kingdom consumer as well as the New Zealand producer, but the Meat Board is putting a

floor in the market for the PM lamb, which while considerably below recent rates, is still some lOp or 18c per lb higher than what it was bringing about this time last year. If, as seems likely on the basis of some reports coming to hand from Britain this week, the board can induce the trade in Britain to resume buying again in the knowledge that prices will not fall below this level, it will have a further considerable achievement to its credit. One of the strengths of the board’s policies and that of its chairman, Mr Hilgendorf, has always been to emphasise its fund* amental belief in free trading and private enterprise. Its interventions in the market are, therefore, only short-term to preserve the market and alleviate a crisis situation. When the ripples settle again, there is a return to normal trading, but, of course, under the eye of the board. Professor B. .1. Ross, professor of agricultural economics at Lincoln College, said this week that in the face of the very steep fall in prices and the special circumstances applying in the United Kingdom market at the time the board was required to take some action.

The special circumstances were the bunching of arrivals of lamb and also that meat traders in the United Kingdom seemed to be standing back from the market so that prices were falling further and further, and to a lower level than if they were operating to clear the market. In this situation of uncertainty he believed that it was necessary for the

board to put in a floor to 1 the market.

If the board’s ploy was! successful, trade would re-j sume at prices attractive) to consumers and while; lower than previously not disastrous, and the board; would, under these circum-! stances, not have to buy meat.

If it was correct that the) market had indeed started to move up again, then “it was marvellous.” “The Meat Board has acted in this instance, not just on behalf of producers but for the benefit of the nation as a whole,” the deputy-chairman of the electoral committee of the Meat and Wool Boards and the chairman of the meat; and wool section of North Canterbury Federated Farmers, Mr M. R. Barnett, said this week. “Already the effect of their decision has halted the slide and indeed prices have improved, which suggests that the minds of some of those who market our product have been strengthened. “Obviously the load-out ban imposed by the meat workers earlier in the season is now having its effect and at the time the, chairman of the Meat Exporters’ Council, Mr! Leonard, suggested that the union action could cost the country some 341 M. Some! responsible body must save! this valuable overseas ex-! change and hopefully it will be a short term exercise by the .Meat Board. I But those who are strong marketers of our meat have nothing to fear. I am sure that the board and farmers are still intent on having strong private! enterprise responsible for the marketing of our meat,” said Mr Barnett, i