THE PRESS THURSDAY, FEBRUARY 25, 1988. Good news, bad news

Press, 25 February 1988, Page 12

THE PRESS THURSDAY, FEBRUARY 25, 1988. Good news, bad news

New Zealand’s export meat industry, confronted by all manner of difficulties at present, has some good news and some bad news this week. The good news was confirmation of a substantial deal that was signed with Iran, one of New Zealand’s biggest customers for sheepmeat. The bad news was the first public indication that sheepmeat exports to our other big customer, Britain, are likely to be linked with negotiations on access for New Zealand butter to the European Community. Senior British Government officials have hinted strongly that the European Community could well ask New Zealand to restrict sheepmeat exports to Europe in return for a better deal on butter than might be forthcoming otherwise. The suggestion comes as the Minister of Foreign Affairs, Mr Marshall, stumps through Europe’s capitals trying to enlist support for continuing access to Europe for New Zealand butter. The agreement under which New Zealand has had a diminishing quota for butter exports to the E.C. runs out this year. The fight for continued access will be tough. This year’s quota is 74,500 tonnes. The butter quota has been reducing by 2000 tonnes a year. Some European trade officials have said that they would prefer an end to a tonnage quota and that New Zealand should be tied to a percentage share of the market. These sentiments, Europe’s own butter stockpiles, and declining butter consumption in Europe always meant that this year’s butter negotiations would be difficult; the likely attempt by the Europeans to make a bargaining chip of New Zealand’s sheepmeat exports is a complicating and disappointing factor. The prospect that butter exports will be used as a lever to impose controls on sheepmeat exports to the community has been faced before. New Zealand has been able to frustrate any linkage in the past; the European mood might be firmer this time. Because of subsidies to farmers under the community’s Common Agricultural Policy, Europe’s own production of sheepmeat has climbed spectacularly. A glut of domestically produced lamb and the agitation among Europe’s farmers who want to bolster sagging prices are strong incentives for European negotiators to put the pressure on New Zealand to lower the quantity of its sheepmeat exports to Europe and simultaneously raise its prices to artificially high levels. New Zealand’s sheepmeat exports to

Europe are under voluntary restraint. At present, New Zealand limits these exports to 245,000 tonnes a year. In addition, New Zealand lamb is not sold in Ireland and only a few thousand tonnes are sold in France, so as not to disturb the home markets of Europe’s traditional domestic suppliers of sheepmeat. Although French flocks have been declining in numbers, the C.A.P. subsidies have created surpluses where there were none before, and Britain’s lamb production has increased considerably. Another consequence of this for New Zealand is that the British Government,' traditionally a supporter of New Zealand’s access to the European market, has been under pressure from its own sheepfarmers to be more protectionist. New Zealand lamb can still be sold in Europe more cheaply than the local product, in spite of the subsidies to European farmers and in spite of the cost of freight for meat from the other side of the world. The price that could be charged for New Zealand lamb to cover costs and still turn a reasonable profit is lower than the farmers of France, Britain, and Ireland are prepared to accept for their product. The concern of these farmers is two-fold and New Zealand will face a two-pronged attack on its lamb trade: price (too low) and volume (too high). If negotiators for the European Community succeed in forcing a trade-off between butter and sheepmeat exports, a sharp reduction in lamb sales to Europe is possible because New Zealand negotiators are likely, if pressed, to be more concerned to maintain the volume of butter. All the better, then, is the news that a firm contract has been signed for the supply of 100,000 tonnes of lamb and mutton to Iran. This is more than in the current season’s contract, though less than the 110,000 tonnes shipped in 1986-87. The price in the coming year’s contract, though undisclosed, is reported to be better than in previous years. Worthy of note is the inclusion of mutton in the contract for the first time in 10 years, and the New Zealand Meat Board’s belief that future Iranian contracts will be for mutton as well as lamb. The new contract will bring some stability to the meat industry’s working year as well as some much-needed reassurance of there being markets for the product. On balance, though, it might be just as well that freezing works’ killing tallies continue to decline and that there is consequently less lamb and mutton for New Zealand to have to sell.