Lack of demand blamed for U.S. lamb market problems

Press, 27 April 1989, Page 21

Lack of demand blamed for U.S. lamb market problems

by

TOM BRIDGMAN

NZPA Washington A study of lamb imports by the United States Department of Agriculture provides little ammunition for United States producers wanting to block or reduce imports of New Zealand lamb. The report, prepared as part of the compromise on lamb in last year’s Trade Bill, says the decline in the United States lamb industry is not the result of imports but because of a lack in consumer demand. Its conclusions provide little comfort to the United States sheep industry which is expected to look to the report for material to back arguments that imports from New Zealand and Australia are harming local producers and should be restricted.

In negotiations leading to the passage of the Omnibus Trade Bill in 1988, sheep producers had sought to get lamb imports treated the same as beef, that is subject to limits, but finally had to agree to an industry study looking at the impact of imported lamb on the domestic market. The bill also provided procedures for the sheep industry to seek relief through the United States International Trade Commission, if imports were adversely affecting the domestic market. The drive for restrictions on imported lamb had partly been sparked

by the arrival in the United States last March of 9000 live lambs from New Zealand, the shipment coinciding with a decline in lamb prices caused by an upturn in production and record heavy weights at a time in the year when returns are usually high. The shipment from New Zealand equalled about 1 to 2 per cent of the average monthly production in the spring period. However, the Department of Agriculture said the quantity of live lambs imported' was insufficient to explain the large drop in prices at that time.

The department’s report says the sheep industry in the United States has declined to the stage where it is now a “speciality industry,” a conclusion which indirectly demonstrates the difficulties faced by New Zealand companies looking to expand markets in the United States. The consumption of lamb and mutton a head in the United States was o.6kg in 1988 (compared with 13.8 kg of lamb and 26.2 kg of mutton a head in New Zealand in 1987), making up only six tenths of 1 per cent of total meat consumption. The peak year for consumption was 1945 when 2.95 kg a head was eaten. “Unless there is a big change in the demand for lamb, which would raise returns and attract new producers, the level of

production will likely cycle around present levels in the future,” the report said. “The industry’s challenge is to attract new consumers of a relatively expensive red meat when red meats are losing market share to poultry, primarily because of lower relative prices for poultry. “Gains for the lamb industry depend on increasing the consumer base. Even though lamb has been sold in the United States for many years, its unfamiliarity makes it appear in a marketing context as a new product to most consumers.

The report said imports and domestic production of lamb had both declined, at about the same rate, “indicating that the decline in the lamb industry. is not the result of import penetration, but mainly because of a decline in consumer demand.

“Imports have been counter cyclical, attracted into the United States when production declines lead to higher prices.” Lamb imports provided for about 9 to 10 per cent of domestic consumption in the United States and were expected to remain in that range for the next several years, it said. Chicken and turkey consumption had increased because of lower relative prices, compared

with beef, pork and lamb, while to a lesser extent the gain in market share for the poultry industry had been the result of offering a lower fat/ cholesterol product, advertising and the development of new products. “Beef, pork and poultry industries have all been attempting to add new products which fit into modern lifestyles, such as prepared and further processed products which can easily be used in a family where both adults work or in single-person households.” The report said the promotional impetus of countries exporting lamb to the United States might benefit the local producer by widening the consumer base. An increasing proportion of lamb imports had been fresh product, par-

ticularly from Australia which, the department said, had been an innovator in the delivery of fresh lamb to the United States. In the period to September last year, 60 per cent of Australian lamb was fresh, compared with 15 per cent for New Zealand. “The Australians have also been promoting their lamb to United States consumers in a much more visible way than the domestic industry. The Australians appear to be trying to establish a broader consumer base, which in the long run could be beneficial to the domestic industry. “The United States lamb industry will likely need to consider the costs and benefits of increasing the promotion of its product to attract a broader consumer base.”