TheBeefSite.com - news, features, articles and disease information for the beef industry

Featured Articles

Trouble in Paradise: New Zealand Today and Tomorrow

28 January 2009

New Zealand is an island blessed with green fertile pastures and total isolation. Situated on the Southern hemisphere of the Pacific Ocean, this deciduous climate is perfectly balanced for livestock farming, but it is the economic landscape that producers stumble on, writes Adam Anson, reporting for TheCattleSite.

Agriculture and New Zealand go hand in hand, but outside pressures are fueling a modern trend towards urbanisation, threatening permanent change. The country has good pasture, suitable levels of wind, rain and warmth and being isolated from the mainland continents of Europe, Asian, Africa and the Americas means that it is also isolated from animal diseases.  Yet, in this perfect climate New Zealand is finding a whole world of problems on its own.

Hampered by a recent draught and low levels of local research the industry has fallen in recent years, but as Stephen Morris - Professor of Animal Science, Institute of Veterinary, Animal Biomedical Sciences - says: "It is an industry in change."

Agriculture, food and forestry industries are the central pillars of New Zealand's economy. Speaking at the Quality Meat Scotland Research and Development Conference of 2009, Prof. Morris explained how they have helped shape the society, attitude and culture of the population, and in doing so have become major determinants of their social well-being. Combined, they generate 64 per cent of merchandise exports and are the only real industries in New Zealand that have the market capacity to compete on a global scale. However, "Profitability is a moving field", warned Prof. Morris, and producers must learn to move with it.

Where We Stand Today

The importance of agriculture to New Zealand cannot be underestimated. The huge amount of income brought in by livestock exports is unique to this country. 82 per cent of beef is exported and an even greater 92 per cent of lamb is destined for foreign markets. The New Zealand meat industry generated $NZ 5.7 billion in revenue during 2006-07, which equates to 18 per cent of total export receipts.

In that respect, the livestock industry in New Zealand is engineered to the global market. International access is primary to this industry, which begs compliance with food safety and biosecurity measures worldwide. Perhaps then, it is because of these outside, limiting parameters that profit return for livestock farmers has been unacceptably low since 2004/05.

It is strange to think that such a global player in the meat industry is so readily governed by foreign forces. After all, New Zealand supplies 50 per cent of world sheep meat trade and 9 per cent of beef trade. The processing of meat is efficient and the product is disease free. One pr that Prof. Morris did point out was a battle against seasons. New Zealand is unable to source its products between July and November. Consequently, 25 per cent of Fonterra's milk is sourced outside of New Zealand.

Despite of its huge global dominance of the sheepmeat sector, there is little economic gain to be taken from this industry. In response, more and more sheep farmers are jumping ship to the dairy industry. Since 1990 level of sheep numbers have dropped year on year from over 55 million to just above 35 million. In the same duration of time, dairy has has leapt from just over 3 and a half million to just under 6 million by number, yet beef number fell by 4 per cent.

Despite numbers have dropped, carcass weights have increased by a margin that comfortably substitutes this loss. In 1980, steer carcasses averaged 277.2 kilogrammes by weight, whilst bulls score 252.4 kilogrammes. Today these figures lie at 319.3 kilogrammes and 310.4 respectively. Interestingly, last year's devastating drought in New Zealand is highlighted in these figures by a one-off fall in annual gains.

Inspite of this New Zealand was still able to export 600,000 tonnes of beef, slaughtering 2.2 million cattle that year of which 37 per cent were steers, 27 per cent were bulls and 36 per cent were cows. 1.4 million calves were also slaughtered in 2007.

55 per cent of New Zealand's exports go straight to North America, with North Asia picking up 26 per cent and the rest being shared between South Asia (11 per cent), EU (3 per cent), Pacific (2 per cent) and other counties taking the last 3 per cent combined. Normally, only 1,000 tonnes of beef and veal is exported to the EU in conjunction with quota limitations, but with Argentina and Brazil facing difficulties, New Zealand was able to up that number to 10 million tonnes in 2007/08.

Most of New Zealand's meat is used for upper end processing, says Prof. Morris. In reality, this means high quality packaged food and fast food, to which Prof. Morris sees a healthy opportunity within the American market, again taking into account difficulty with South American suppliers.

Currently, steer prices are improving, averaging 355 cents per kilogramme. "There are signs that this will go up in the next period, added Prof. Morris. However, there is a question if this profit will filter down to the producer. Whilst steer prices are improving, profit on the farm for beef and sheep producers has deteriorated tragically since the beginning of the millenium. In the year 2007-08 they achieved their lowest profit in 50 years. As Prof. Morris says: "it is a gloomy time".

A Step into Tomorrow

To turn this trend around Prof. Morris suggests that improvements can be made by changes in management, including: (i) level of feeding, (ii) age and weight at harvest, (iii) animal health, (iv) different genotypes and (v) improved efficiency. The efficiency of pasture feed conversion relies on pasture feed utilisation and animal feed conversion efficiency combined. However, if the use of the Residual Feed Intake system for net feed intake should be used was questioned by for Prof. Morris. Whilst the system helps cows achieve optimum size it doesn't take into account their use for pasture management.

Efficiency also needs to be found at several levels of the industry chain. "We've got to involve the entire industry", he said, stressing a need for those researchers that understand the industry as a whole, rather than specifying in just one area. The lack of overall research was also a point of contention for Prof. Morris. Little development has been seen on this front for a long time in New Zealand.

New Zealand spends far less on innovation than other developed countries. Currently it stands at a mere 1.17 per cent of gross domestic profit by comparison to the average 2.24 per cent. Historically, funding levels were cut drastically after a long ongoing study showed that there was little return on public investment. However, private research and development returned a phenomenal NZ$68.7 for every 1 spent. This huge cut in research and development may now be severely hindering the industry, especially in its ability to understand and adapt to this time of dramatic change, both to the way farmers perceive production and to the market factors that influence them.

Throughout the industry New Zealand needs to come to terms with modern consumer and market expectations and they need to meet demands for quality, safety, and ethical credentials. "Integrity and reputation is paramount" Prof. Morris said. Now they face a bigger challenge, coming from the least expected of all directions: the environment.

This could represent a big worry to New Zealand's agriculture. Not only could the effects hinder the industry but, with more emergency, the emission cuts expected of it will make the beef and dairy sectors unworkable and unprofitable. "If the rest of the world insists on this, New Zealand will struggle" Prof. Morris said.

But the biggest collateral that New Zealand owns does not reside with the environment. It isn't buried in the peaks and crests of those rolling hills, nor does it hide amongst the boundless hooves of its animals. The true collateral is the farmers themselves and the biggest fear is there loss. At a time when farmers will set their gaze to the cities beyond their horizon, they must be assured that a better future lies much closer to home.

January 2009

Partners


Seasonal Picks

Managing Pig Health: A Reference for the Farm - 2nd Edition