THE PRESS FRIDAY, JANUARY 7, 1983. Meat prospects brighter

Press, 7 January 1983, Page 10

THE PRESS FRIDAY, JANUARY 7, 1983. Meat prospects brighter

Within two days, reports from three different parts of the world have suggested that the prospects for New Zealand meat exports this year can be viewed with cautious optimism. The United States has announced that it will not restrict meat imports for at least the next three months; the sheepmeat management committee of the European Economic Community has decided that New Zealand's quota of lamb sales to France will increase by about 9 per cent for 1983; and the Meat Board expects that Iraq will buy about 10,000 tonnes of New Zealand lamb this season, compared with none last year. The American decision is based on analysis by the United States Agriculture Department of beef stocks in the United States and around the world. The department estimates that the likely level of imports will be below the trigger level of 554,000 tonnes that would require restrictions under United States law. The effect on New Zealand should be a reduction of manufacturing beef stocks being held for sale. Most New Zealand beef sold to the United States is manufacturing grade, used for the fast food and processed food industries. Beef exports from the Common Market and from Argentina are expected to drop this year, further opening the market for New Zealand. The ‘United States has not imposed restrictions in recent years, although Australia, New Zealand, and Canada agreed to a voluntary limit on beef sales to the United States last year. This was largely the result of increased shipments early in the season from Australia, where a severe drought resulted in increased slaughtering and more meat becoming available for export. Australia is likely to concentrate on rebuilding herds when the drought ends and competition from this source may not be as great. Although these factors, together with a drop in United States pigmeat production, shov’d mean easier access for New Zealand beef on the American market, the picture is not without clouds. Beef prices in the United States are declining and have prompted the California Beef Council to draw on a $4 million fund, raised by a levy on cattle sales, for an intensive advertising campaign. New Zealand bull meat is selling for about $3.23 a kilogram on Californian docks, about 60c a kilogram below the prices being achieved just a few months ago. Some improvement in the price is expected during the year but, for manufacturing beef at least, it is unlikely to be marked. Of more concern for New Zealand beef exporters to the. United States are pressures likely to occur later in the year, when the United States Agriculture Department will review the need for restrictions. The pressures are likely to result from another agricultural surplus; dairy products. Both the United States and the E.E.C. have large surpluses of dairy products and a trade war is looming. The E.E.C. has an annual dairy surplus equivalent to about 10 million tonnes of milk. Exporting this already costs the Community billions of dollars and milk subsidies are the single most expensive item in the Community budget. United States officials said last week that President Reagan would soon decide on a package of trade measures that could sell off the United States dairy surplus on world markets under subsidies to counter those in Europe.

An action such as this would be bad news for New Zealand dairy producers; the

alternative would be bad news for New Zealand beef exporters. The United States Congress is under strong pressure to make big cuts in the milk price subsidies, both in the interests of the United States economy and to reduce the large surpluses of milk, butter, and cheese held in Government warehouses. If this view prevails, and dairy subsidies are reduced, the most probable outcome would be that American farmers would send large numbers of dairy cattle to the slaughterhouses. Trade sources active in the United States market believe as many as a million head could go to the butchers. The result, in lower sales and lower prices, would be a severe blow to New Zealand exporters of beef to the United States.

In the long term, however, benefits could accrue to both dairy and beef producers in New Zealand. Depletion of American dairy herds to this extent would reduce the risk of large dairy surpluses in the United States in future years. This would mean a stronger market for New Zealand dairy produce. Such a large kill of manufacturing beef in one year would mean a domestic shortfall in the United States in subsequent years and, once again, the market for New Zealand exports should strengthen.

The increased quota for sales of lamb to France is little enough at 251 tonnes, but it is important for two things: it is an increase at a time when E.E.C. quotas for non-Community imports are generally being reduced, and it reflects a growing preference for specifically New Zealand lamb on the French market. Until now, most of the New Zealand lamb sold in France has been bought by restaurants and the catering trade. An increasing amount is being sold in French supermarkets at prices generally above those for fresh local meat. As well as getting the increased quota, New Zealand will benefit from changes to French veterinary regulations that will mean smaller cuts of lamb, preferred by French housewives, can be exported to France.

Iraq is an important market for New Zealand lamb. In 1980-81 Iraq took nearly 30,000 tonnes of New Zealand lamb worth $7O million. Last year Iraq withdrew from the market and this, combined with the long-delayed and much reduced sale of lamb to Iran, was a prime cause of the marketing problems that led the Meat Board to take control of the lamb export trade. Iran has already confirmed that it will take at least 100,000 tonnes of lamb this year and Iraq’s expected reappearance in the market should provide an extra boost to the troubled industry. Iraq offers the next best market in the Middle East after Iran and the chairman of the Meat Board, Mr Adam Begg, believes that annual sales to Iraq could reach 20,000 tonnes without too much difficulty. These are encouraging signs for the meat industry, at least better than at this time last year. They should mean that stocks can be sold and the problems of storage eased. They do not indicate any great improvement in returns, however, and much will still depend on events in the United States and the E.E.C. Any improvement in prices will benefit the taxpayer rather than the farmer. Substantial export price increases will be needed before farmers are again exposed to direct market forces; but any lessening in the subsidies at present being paid under the supplementary minimum payments scheme will be welcome.