Lamb slump highlights trade methods

Press, 25 February 1977, Page 1

Lamb slump highlights trade methods

Wellington reporter

The dramatic slump in prices for Xew Zealand iamb in Britain, and the even more dramatic announcement by the Meat Board that it would set up its own trading company in London, has focused national attention on the way in which New Zealand markets its lamb in Britain.

When the price of lamb fell from about 4Sp per lb to 40p within a few days, the export load-out ban applied by the New Zealand Meat Workers’ Union last November was given as the main cause. It was said that the ban starved the market during the lucrative holiday season and caused “bunching” later when a glut of lamb arrived on the market. But the Meat Board did not accept this reasoning. When it announced on February 21 that it was setting up its own trading company in London to buy in lamb and attempt to stabilise the British latnb market, it said it considered the unprecedented falls in the price of lamb over the last two weeks to be quite unjustified.

Predictably, the members of the Imported Meat Trade Association in Britain disliked the board’s action, and described it as “an ill-conceived interference in the trade." Since then, the chairman of the New Zealand Meat Exporters Council (Mr W. F. Leonard) has commented that "the board’s decision . . . may seriously rebound against the lamb trade.” If prices pick up before the Meat Board has to buy and store significant quantities of lamb, then the board will no doubt claim its actions achieved this, while the companies will claim it would have happened anyway. Already the companies are claiming that the lamb market had “bottomed out,” and was picking up when the board acted.

If prices remain about the present level of 40p per lb for PM grade Jambs delivered ex-ship, then the companies will no doubt claim that the board’s action had this undesired effect, while the board will claim that prices would have gone lower if it had not stepped in and held them.

If, however, the board has to buy huge quantities of lamb, then these explanations will be of considerably greater interest than the academic interest they nqw hold. Then the question of who is a “weak seller” will be of paramount importance.

One industry source suggested that prices in Britain had been allowed to fall so that consumption might rise, implying that

the fall in price might have been at first a deliberate ploy by the exporters. He said New Zealand had to sell 17 million lambs in Britain.

Although there is no machinery in Britain for ensuring a set price between lamb sellers, the adjacent stalls on Smithfield market usually enable a degree of uniformity However, the percentage of lamb available for sale which actually appears on Smithfield is variable and usually small. A more important determinant of price is the quantity available for sale, the quantity due to arrive shortly, and the amount of cold "storage available at the time. The time any seller can hold meat before sale will largely determine how "strong’’ or "weak” a seller he is, although this is not the only factor.

It will probably be found in retrospect that if there were any "weak sellers” whose actions led to the Meat Board’s intervention in the British lamb trade, they were those with the greatest pressure on the available cold-store facilities, rather than necessarily being either “co-operative” or proprietary operators.

Opposition to board Page 3.