Lamb for Iran

Press, 30 January 1986, Page 20

Lamb for Iran

Yesterday’s report that another sale of lamb is being negotiated with Iran is a further reminder of the importance both of Iran as a market and of the sheep industry to New Zealand. The meat industry hopes to sell Iran no less than one-third of New Zealand’s' total lamb production. Last year, Iran bought about 120,000 tonnes out of a total production of 391,000 tonnes. This was a little less than one-third. In the 1983-1984 season, Iran took 140,000 tonnes of New Zealand’s production of 423,000 tonnes, which was a little more than one-third. Only Britain took more than Iran last year and, in the previous year, Iran was New Zealand’s largest market for lamb. Iran is not only a huge market for New Zealand lamb, it has shown itself to be a reliable one over the last few years. The result has been some rapid adaptations in the freezing works in New Zealand to make sure that they conform to the religious requirements of halal killing. A number of factors complicate dealing with Iran, the trickiest being that Iran has insisted on oil-for-lamb deals in the past; and it may be expected that it will again press for such a deal this year.

In the past, the Meat Board, as the single seller of lamb, has managed to sell the oil through a broker and obtain the money. This year’s oil market is even more seriously glutted than markets in the last few years. The Meat Board presumably acquired a certain expertise in conducting what it termed “back-to-back” deals. The Meat Board did not take physical possession of the oil but arranged for the oil to be sold and for itself to be paid from the proceeds of the oil. This year the Meat Board is only one of the parties in the negotiations and its experience in the past will presumably bolster the confidence of any of the meat companies troubled by visions of becoming the far-from-comfortable possessor of a

tanker full of oil sailing round looking for a buyer.

The Meat Board has handed back many of its selling functions to the meat companies. It has retained a selling role for itself under particular circumstances. Iran has a single buying organisation and it may be expected that the Meat Board’s role in Iran will be more prominent than in some other markets. The importance of Iran’s market to New Zealand becomes plainer when it is realised that it is the second biggest customer for New Zealand’s biggest industry, the sheep industry. In the year which ended in June, 1985, New Zealand earned more than $2.6 billion in exports of lamb, mutton, and wool. The next biggest industry was dairying, which earned $1.4 billion. The third biggest was the beef industry, which earned $952 million. Hides and skins are not included in the sheep or beef totals. In spite of the reliability of the Iranian market, it is a sobering thought that so much of New Zealand’s biggest industry depends heavily on one country. The meat companies have obtained some Government finance to bridge them over the period between the purchase of the lambs and the sale of them to Iran. Presumably this will be made available at something like standard rates of interest and will be all repaid. If that is so, there should be no problems through any country or firm accusing New Zealand of subsidising exports. The Government, in fact, is acting sensibly in making the money available for a period. The New Zealand economy is small, and the meat companies were presumably not in a position to carry all the cost before the sale. The negotiations are invariably long-drawn-out affairs. It was not a time to hold back money that was available and to make statements based on an ideological position in economics. The Government acted pragmatically, as well it should, to assist New Zealand’s biggest export industry.