MEETING THE CHANGING MARKET FOR OUR MEAT

New Zealand Journal of Agriculture, Volume 97, Issue 3, 15 September 1958, Page 249

MEETING THE CHANGING MARKET FOR OUR MEAT

OUR traditional market for meat in the United Kingdom is shrinking and likely to continue to do so. Against this rising standards of living in many parts of the world are creating a demand for meat. What is being done to see that New Zealand capitalises on every opportunity to sell its meat to greatest advantage is described in this article, which was contributed as a paper to the 1958 Ruakura Farmers' Conference by Mr L. A. P. Sherriff, a member of the New Zealand Meat Producers Board. Mr Sherriff impresses on farmers that established markets will best be preserved and new markets won or expanded by maintenance of the highest standards of quality.

TN the first three-quarters of a cenA tury of our meat export trade —that is, until very recent times—there was really no changing market for meat. Throughout those years almost the entire export production from New Zealand was sold on the United Kingdom market. The only changes of significance were those arising from

the general rise and fall of primary produce prices; the periods of bulk purchase and sale during and after two world wars; the development of the chilling process for beef; and the comparatively slight variation in consumer preference. All of these changes occurred within the same basic pattern of marketing. , Today that pattern remains for practically all classes of our meat, but in the few years since the end of rationing and bulk purchase in the United Kingdom in 1954 there have been developments which have produced in the meat industry a profound sense of change and a widening of horizons and responsibilities, and have presented a challenge to the industry’s adaptability after long years of established routines and rule-of-thumb methods in marketing. That challenge is being vigorously taken up with extremely encouraging results. I believe

it is reasonable to conclude that our meat export trade, which already earns about a quarter of the country’s income from primary produce exports (it contributed £70.9 million in 1957) must provide an increasing share of our export receipts in future. Encouraging Greater Production The Meat Board has been conscious of very considerable responsibilities not only to the producer but to the country as a whole in the development of our trade. During and after the Second World War, in view of the British Government’s request for increased supplies, the board, as administrator of the Meat Industry Reserve Account in conjunction with the Government, and with full Government approval, took steps by financial investment to promote increased production of meat.

Funds were invested in the establishment of fertiliser works owned and controlled by farmer-shareholders at Napier, Tauranga, and Awarua in Southland. Loans were also advanced to aerial topdressing firms to enable them to convert to modern aircraft. These were two major points of policy designed toward increasing production by expanding the carrying capacity of existing farms and converting the traditional role of hill country farming in many instances from that of producing only store stock to that of the fattening farm.

More recently new urgency has been given to this drive for production, for we are told by statisticians that we must' plan to supply food and sufficient export income to sustain a third and possibly a fourth million of population by the 1980 s. Fortunately, well considered planning for increased meat production by way of new techniques and aids to agriculture has contributed greatly toward increase in production already. As carrying capacity has risen we have had a phenomenal increase in our breeding ewe population 26 per. cent in 5 years, one more ewe for every four carried 5 years ago. In one year (1957) our breeding ewe numbers rose nearly 2 million. /-

Our meat export volume has risen from 297,000 tons in 1938-39 to just on 400,000 ..tons in 1956-57, the last complete year for which returns are available. We have the prospect of continuing expansion of our export surplus. This we have had to foresee. The Meat Board, having responsibility for the guidance of our industry and promotion of the sale of its : product overseas, has felt that it must embark on a bold yet fully considered policy of study and development of markets.

Leading Position as Exporter

In considering the changing market for meat we must first realise that though we are a very small nation, we are the greatest exporters of lamb and mutton. We are the only large exporters in the lamb and mutton trade. Our production policies have been based on sheep raising and have been devised to meet the requirements of a particular market, the United Kingdom.

In any consideration of New Zealand export meat marketing it should be noted that nearly 50 per cent of our meat exports by volume and about 60 per cent by value is lamb. If we add mutton, we find that about two-thirds of the weight of our export meat is comprised of sheep meats. It must then be realised that 98| per cent of our lamb and 92 per cent of our mutton are still absorbed by the United Kingdom. At present the United Kingdom offers the only market of any substantial importance for mutton and lamb. These meats are not widely eaten in other meat - importing countries.

Our first consideration must therefore be the requirements of the United Kingdom mutton and lamb market. We cannot look at this market without also taking into account supply, price, and consumption of meat of all kinds in the United Kingdom. We also have to note that apart from the present year, in which a most welcome increase has been found in our beef market in North America, the permanency of which no one can foretell, the United Kingdom has still been absorbing about half our export beef.

United Kingdom Market

The present United Kingdom meat market is heavily supplied. The policy of substantial subsidy, which successive governments have maintained, . has produced its intended result. United Kingdom beef production has been steadily rising and on the evidence of all available data it must be expected to increase. The output of mutton and lamb, though increasing more slowly, shows signs of more marked expansion. The result has been that for the first quarter of the present year the United Kingdom derived from her own farms 63 per cent of the meat she consumed. This compares with the 61 per cent produced in the first quarter of 1957 and only about 50 per cent. of a smaller total consumption before the war.

These figures indicate the trend which the United Kingdom subsidy policy has promoted. The cost of production remains very high and is increasing, and it must be realised as an undisputed fact that beyond a certain level subsidised production is uneconomic. But the subsidy enables the home-killed meat to compete more effectively with the more cheaply produced imported meat and helps to restrain meat prices generally, thereby indirectly returning to the United Kingdom taxpayer something of the large sum he is obliged to spend annually in subsidy to the home producer; at the same time the cost of imported meat is kept down, which vitally concerns us in New Zealand.

While United Kingdom production has been increasing so also has the total supply from countries exporting to the market. Per capita and total consumption of meat in the United Kingdom have expanded to a level above that of pre-war years, but it is unlikely that this consumption will inciease as rapidly in future as it has done in the years since rationing ceased. There is, therefore, prospect of a static or reduced market for meat imports into the United Kingdom. At the same time the major exporting countries are expanding their export surpluses.

For a considerable number of years the Meat Board has fully realised the

vital importance of this development and has taken opportunity to impress this on New Zealand Governments. It is claimed for New Zealand that under the terms of the Ottawa Agreement of 1933, which though a quarter of a century old still largely influences the pattern of trade between New Zealand and the United Kingdom, Commonwealth suppliers have the right to share the market with the United Kingdom producer, with foreign suppliers in third place. This case is currently being represented and annual consultations have now been instituted between the United Kingdom and New Zealand on production and import policies.

At the same time it has been possible to reduce the weight of New Zealand meat on the United Kingdom market by the energetic pursuit of markets elsewhere. We have been favoured with attractive opportunities, and we are taking the initiative to develop more. These I shall consider shortly. Meanwhile, bearing in mind that for the foreseeable future the United Kingdom is likely to remain our major market, it is desirable to consider the changing requirements of our customers there.

Preference for Light Lambs

Throughout the years of the bulkpurchase contracts during and immediately after the war the United Kingdom housewife had no freedom of choice. A strong aversion to fat was built up and now because of this and also from the point of view of economy and changed eating habits the British housewife is still more unfavourably disposed toward fat with her meat. She, and in turn the butcher, look for the lean because she refuses to pay a high price for the fat. This trend favours New Zealand lamb, since our lamb trade has been built in the main on the 29 to 36 lb. lamb (the two grade), which is considerably lighter than the heavy lambs comprising the major portion of United Kingdom production.

The even grading and quality of our lamb, accompanied by intensive sales promotion extended lately to television—have established a demand for it which continues to give us a marked premium over all other imported lamb and which in the years since the war has steadily reduced the margin between the average values of New Zealand and those of United Kingdom-produced lamb. Our product is in fact today being represented by meat trade experts to British producers as a model on which they should base a revision of their production pattern.

But we have to note the great emphasis placed on the leaner carcass. You will have noted this in the comments in recent seasons from the London judges of our export lamb

competitions and from many other sources. The judges this year observed: “A lamb of the old-time recognised show standard, prime but overfat, is now a thing of the past, and the urgent necessity for the trade today is a 30/32 lb. prime carcass of good conformation and with full meat content and a minimum of waste.”

I should emphasise that the point at issue is the difference between a prime lamb, which is wanted, and an overfat lamb, which is not wanted.

For the producer, therefore, the emphasis may well be on the quickgrowing, early maturing animal which can be most economically produced. This point was effectively made by Dr John Hammond during his recent tour of New Zealand at the invitation of the Meat Board. Dr Hammond said the meat producer of today had two people to please, the butcher and the consumer. The meat producer (in our case the New Zealand farmer) wants fast-maturing animals, which give him a rapid turnover and a good profit. The butcher wants profitable carcasses, with a high proportion of the better cuts. The consumer wants tender meat with not too much fat.

Quality of the meat, of course, is a major objective, but there are varying ideas of what is meant by quality.

Dr Hammond said: “My definition of quality in meat is that which the public will pay more than the average price for.” This is a commercially sound definition.

Dr Hammond said that different joints from the carcass sold at very different prices per pound, so the emphasis was on increasing not only the eating quality of the meat itself, but the proportion of the more valuable cuts in the carcass.

Summing up, he said that the main object in producing quality carcasses was to bring the animal to the optimum weight as quickly and as evenly as possible to get the most valuable proportions and the more tender meat without too much fat. “Evenly” must be closely related to type, selection, and breeding.

Markets Outside U.K.

Our potential export surplus of meat, notwithstanding the expected growth of our domestic consumption, is undoubtedly very great. It follows therefore that market prospects must be assessed and measures taken to ensure the most vigorous pursuit of every opportunity, not only in existing markets but in the development of new outlets wherever possible, on a long-term as well as a short-term basis.

Fortunately for us, our policies in the past have endowed us with breeding stock of very high quality with a clean bill of health. New Zealand’s

freedom from foot and mouth disease plays a very significant part in our opportunities to exploit trade with many countries. Fortunately for us also, rising living standards coupled with rising populations and increasing expenditure on food not only in the Western world but also in other countries, are promoting increased demand for meat. Meat consumption is very sensitive to economic trends. While prosperity continues in general our opportunities may be expected to continue to grow.

The enterprise of our exporters has enabled the country to enjoy expanding sales of meats in markets outside the United Kingdom since bulk purchase ended in 1954. Though such sales were of minor consequence in the pre-war years, from last season’s production 75,500 tons or 19.7 per cent was sold outside Britain, and in the present season this total may be still greater. From the start of the present season on 1 October 1957 to the end of April 1958 the total of meat sent to other markets was double that of the same period of last season and constituted 20 per cent' of our shipments abroad for the period.

Next Objective

The Meat Board some time ago believed that 20 per cent of our export to markets other than the United Kingdom was a desirable goal, but hardly attainable. Now, with changing conditions, this objective must be revised, not only in the light of the already substantially increased United Kingdom production but in view of potential production i from United Kingdom farms. I feel that the sale of 30 per cent of our exports outside the United Kingdom should be our next objective.

These alternative markets are doubly valuable in that they relieve the weight of. meat going into the United Kingdom and sales are invariably made at prices in advance of those ruling in Britain. Furthermore they are markets which usually buy at prices negotiated before the . meat leaves New Zealand, whereas in the United Kingdom our prices generally are subject to market fluctuation after shipment.

Some of the alternative markets have been consistent over the years. Such countries as the West Indies and Italy, for instance, have been ; regular and substantial purchasers. But the international trade in meat is constantly subject to political policies and, of course, to the balance of payments problems which importing countries are liable to have. The stability of trade with one country or with many countries may, too, be affected, as it has. been this year, by the entry of another purchaser offering higher prices to New Zealand.

North America

The strong demand from North America for beef to help fill a gap caused by shortage of cattle for slaughter this year has expanded more rapidly than expected and opens up the possibility of a continued and very important trade in meat to that area. The Meat Board is convinced that the utmost effort must be made in every possible direction to ensure a continuance and development of trade with Canada and the United States. I feel sure that our very good neighbours on the North American continent would be happy that this should be so.

Of course New Zealand must present her meat in the manner required by any particular market if trade is to continue there.

The board with its responsibilities in the supervision of the trade is well aware of this fact and has taken steps, together with the Department of Agriculture, to ensure that the presentation of beef to North America is in accord with the special requirements there. The board has been gratified to have the full cooperation of the exporters. They have taken energetic action to produce an article which is going to take its place, as our lamb has done, as the best of its kind in the world.

U.S.A. Trade Outprices Others

The American trade has outpriced others. In some respects this is regrettable. We want to maintain a regular supply to good customers. But it is in the nature of trade that supplies go in the main to the buyer paying the best price, and to attempt arbitrarily to alter this concept would be neither practicable nor wise.

We are fortunate in that this is a rather more acceptable problem to have to deal with than those confronting exporters of other types of New Zealand primary produce today. But it is one to which close consideration must be and is being given. If we could overnight expand our cattle population and produce a very much greater quantity of beef this season, we could probably market it satisfactorily; but beef production is a longer-term proposition. For the New Zealand farmer it must be worthy of note, however —and I cannot stress this too stronglythat most of our expanding outlets in world markets at present are for beef.. Our customers have remarkably few opportunities to buy disease-free beef comparable in quality to that which New Zealand can offer.

Though the present demand for boneless beef has turned traditional ideas of relative values upside down, the beef producer would be very unwise to neglect the lessons of the past, which teach the wisdom of putting the

emphasis on quality. Our stud beef breeders over the years have given a notable lead and are contributing much not only to the maintenance but to the further improvement of the standard of our beef herds by their enterprise in importing top-grade stud beasts.

The Meat Board and many others have planned and consistently endeavoured not only to maintain and improve still further the quality of beef but to step up the quantity available for export. It is the concept and furtherance of such a policy that has placed us ahead of our competitors in the lamb market. We should not permit ourselves to be diverted from this same policy in beef production by present events, which put the value of beef suitable for manufacturing out of balance with the value of quality beef recognised as “chiller type”. Quality is still important.

There is at this stage no certain indication of how long present beef values in America will continue, but there is official belief in the United States that though cattle numbers there are estimated to be recovering more quickly than had been previously expected, domestic production of beef may fall considerably short of requirements until about 1959-60. We should be reasonably able to look forward to a continuing demand, particularly for our packaged, boneless beef, which is a product in line with the requirements of modern marketing, standardised in style and weight of package, and easily managed by the manufacturer. It is unsurpassed in quality in its particular sphere..

Europe

Since the war our meat has gone into Europe chiefly through West Germany, Italy, Belgium, and the Netherlands. Of our 1956-57 season’s exports Europe took 21,000 tons or nearly 5| per cent. Imports of meat to the Continent fluctuate in accord with domestic supply and political factors. Protection of agriculture is a very general policy and all European countries . impose restrictions of one kind or another on imports. This season, chiefly because of the strong demand for our beef elsewhere, comparatively light supplies of our meat are entering Europe.

In the longer term the European trade will be subject to developments arising from the introduction from 1 January 1958 of the European Common Market, of which six countries— Germany, France, Italy, the Netherlands, Belgium, and Luxemburgare members. The common market countries eventually will bring their tariffs on to a common level, involving generally higher tariffs on meat imports. The likely full effects of the common market scheme and of the wider free trade area proposed for Europe by the United Kingdom are

still uncertain. The prospect is one of greater domestic production in Europe, but with the possibility that improving living standards may increase meat consumption.

New Zealand sales to Greece constituted a valuable outlet for ewe mutton (about 7,000 tons from the 1955-56 season’s production). The. Suez dispute eliminated this trade for a time and also that to Egypt. Sales to Greece have since been resumed. Other prospects in the eastern Mediterranean are being developed this year including the sale of ewe mutton to Turkey.

West Indies and Caribbean

The West Indies and Caribbean area constitute another example of how improving living standards increase the demand for meat. Our sales to these areas, though they comprise only about 1.8 per cent of our exports, constitute a steady market, taking about 7,000 tons of our meat, comprising mainly quarter beef. Recent investigations suggest that there will be room for expansion of this trade. Here again availability of supplies from New Zealand will be an important factor.

Japan . A new element in our trading was the entry of Japan into the' beef market last year. She bought 15,650 tons of our 1956-57 season’s meat. There seems no doubt that if Japan can maintain her improved living standards and if balance of payments problems do not stand in the way or political considerations operate against us, the Japanese market will continue to be interested in our product. Here again the quality and standards of hygiene we are maintaining are major assets.

In the first year of substantial importing (last year) there was some confusion among Japanese traders as to the types and quantity which the market needed. Today there is apparently a much better assessment of requirements and more interest is directed to G.A.Q. quarter beef. Two factors, however, have combined to reduce the amount that will be bought from New Zealand this year: Balance of payments and other problems have caused the Japanese Government to restrict spending on meat imports; a cut in funds was recently estimated to involve a reduction of total meat imports from last year’s 25,000 tons to 15,000 tons, of which a principal part would be drawn from New Zealand. Since last year, however, the price of New Zealand beef has risen because of the demand from other markets, and it is still uncertain whether Japan will be prepared to meet these price levels this season.

I have mentioned principal markets. There are numerous others to which

smaller quantities of our meat go. These markets are under constant study by the board and by exporters. Among the more important of these outlets are the Pacific Islands, Honolulu, the Philippines, and Malaya.

Transport

To increase our sales in the markets of the world we must not only have increasing supply and increasing awareness of market requirements, but the transport to carry our product in sufficient quantity when and as required. In the first instance within New . Zealand the upsurge in the volume of our meat for export requires enlargement of port and rail facilities, with particular emphasis on the goal of all-weather loading. The board in 1955 placed before the Government a report on urgent and long-term problems. A Government committee investigated and reported on these matters and at many points action has been or is being taken. It is of obvious importance that bottlenecks in the system of transport must not be allowed to impede the flow of our meat to world markets.

It has been one of the principal concerns of the boardindeed one of its central duties ensure the orderly flow of meat to overseas destinations. In years past this was almost wholly a matter of getting the meat to the United Kingdom in appropriate quantities at the most suitable times. Since the war we have needed diversification of shipping to carry a larger volume of produce and we have required new services to new markets. Whereas before the war we shipped to 8 ports outside the United Kingdom, today we ship to more than 30. The advent of these improved transport links in the last year or two has been a milestone in the history of our meat trade.

We have a good service to our principal market in the United Kingdom and coverage of the west coast of Europe, the Mediterranean area, and the east coast of North America, both the United States and Canada. The changed pattern of trade has required the introduction of adequate services to the west coast of North America, Honolulu, Japan, and other parts of the Pacific. These services have enabled exporters to exploit opportunities in markets where before, owing to lack of regular and sufficiently frequent sailings, trade was slow to develop and we were at a disadvantage in competing with other exporting nations.

Presentation and Sales Promotion

Equally important as the necessary handling facilities has been to ensure that our meat was presented in the form required in the various markets and that its sale was promoted where

desirable by personal representation and advertising.

Bagging and packaging are factors to which further attention is being given. With packaging methods and materials changing rapidly under modern conditions, it has been necessary to ensure that full advantage is taken of new means of getting the meat to market in the best condition. It does not necessarily follow that the New Zealand exporter will become quickly or deeply involved in the trade in pre-cut meat, as many had supposed. The requirements of the numerous markets are not by any means all alike. The great bulk of our sheep meats is likely to continue to leave this . country in carcass form for a long time, though the packaging of boneless beef is of course already well developed.

When - new markets are being developed, personal contact is highly desirable, in fact essential, if the most is to be made of our opportunities. With this in mind the board has recently appointed a travelling representative, who is able to obtain and pass on to exporters detailed knowledge of the requirements of various markets and of the operation of policies and regulations or restrictions in the various importing countries.

At the same time information is constantly received by New Zealand Government trade commissioners at key points. Their careful appraisal of markets and their attention to detail contribute much to efficient marketing. Their work is of great value to the board and the exporters.

Advertising and Publicity

In the United Kingdom we have built a fine tradition of sales promotion, reaching the housewife first while she is still a child at school, then when she enters domestic science classes, and eventually when she does her buying in the butcher’s shop.

In publicity as in all other aspects of our trade it is necessary to keep abreast of a changing market. Accordingly New Zealand lamb is now featured regularly at. peak hours on television in Britain, reaching an audience of millions.

■ The trade reports a marked response to this new medium of advertising our meat. Sales promotion is playing a very important part in our marketing in the United Kingdom. Special campaigns and trade displays are now systematically arranged. Advertising was recently undertaken for our lamb in Sweden and is under consideration at present for various new markets. Market Information It is net sufficient that the board and the trade alone should be abreast of changing, markets. Farmers themselves

need to be informed on the progress of the trade, the trend of supply and price, and the relative demand for the various types of meat they produce. For this purpose a market information service has been set up by the board to present weekly and monthly summaries for publication to the producer by way of newspaper and radio and in full detail through the board’s official journal. There is therefore much information available to the farmer to enable him to adjust his own production and marketing to the market as far as is practicable. It is for the farmer, as far as he can, to keep abreast of current trends through these services. These considerations bring us back to the farm on which the meat is produced. Here I think it may be of value to refer to certain factors in the farmer’s out-turn of his stock. He should use the scientific knowledge available to maintain his livestock husbandry in accord with that knowledge. He will also be rewarded if he plays disease, particularly hydatids, which is costing the industry about £2{- million

his part in the precautions against pounds annually. He would be well advised to vaccinate against blackleg and pulpy kidney. He should take particular care to guard against bruising of his stock going to the works and he should always strive to present stock in the right condition for slaughter. These are practical details which should not be overlooked by the farmer wishing to get the maximum return in a market which is indeed a changing one. Above all, the farmer’s job is to produce. I do not believe the meat producer should allow himself to be diverted from his constant objective, the maximum possible economic production. The limits to marketing meat at reasonably . good prices have not been reached, despite the many difficulties that arise from time to time. The farmer cannot expect always to have prices wholly in his favour, but I can assure him that his products are the best of their kind in the world today and that a world in need of meat is increasingly aware of this fact. That is the very sound position from which the meat producer may regard his market and its future.