China FTA saves meat sector $25m

Sales are up as Chinese middle-class affluence leads to consumption of more protein. Photo / Christine Cornege

The free trade deal with China saved the meat industry nearly $25 million last year, says Beef and Lamb New Zealand

Exports of sheep and beef product to China totalled $687.4 million in the year ended December 31, with a tariff savings of $24.8 million.

Beef and Lamb chief executive Scott Champion said volumes were trending upwards as China developed rapidly, with a growing middle-class population looking to consume more protein.

"The number of consumers considered to be wealthy from a global perspective is growing significantly and this is driving increased consumption of imported food products," Champion said.

China was New Zealand's second-largest sheepmeat market by volume, with 29,800 tonnes, out of a total of 355,000 tonnes of exports.

It was likely the free trade agreement with China would deliver another $21 million by the time tariffs were fully eliminated in 2016, Champion said.

"Crucially, the Chinese market is looking for quite a different product mix compared to our traditional sheepmeat markets, such as the UK and US, which take the higher-value cuts like lamb legs and French racks."

China was a key market for sheep flaps, used in traditional Chinese dishes, and co-products like fats, oils and animal casings.

Beef and Lamb chairman Mike Petersen said China had the biggest sheep flock in the world, in which they also counted goats.

"They know sheep meat and the secret now is getting them into the quality stuff that we produce, which they're probably not really that aware of."

Exports to China of sheepmeat and beef last year were worth $119.7 million and $9.2 million respectively, compared with $62.8 million and $290,000 in 2007.

The free trade agreement with China came into force in October 2008.

Food safety was paramount in Asia, Petersen said

"That's probably the thing that they're really looking to New Zealand for - they know our food's safe, it's very high quality and it's consistent."

The industry was over-reliant on Europe for sheep meat, Petersen said.

"The more we can develop out of there the better,'' he said. "The key aim for us is to get a really diversified group of market segments ... that can give us increased returns over time.''

Free trade negotiations were looking promising with India, which had a huge wealthy class and was probably a bigger opportunity than China, Petersen said.

"We're hopeful that this India one will come to fruition maybe even within 12 to 18 months.''

Getting a number of new markets developed and better access was key, Petersen said.

The average sheep and beef farm of about 400ha paid $18,000 a year in tariffs.

"That's a tax that we pay to foreign governments just to get our product into their country,'' he said. "It's about $220 million a year for the New Zealand sheep and beef industry.''

Beef and sheep meat prices were strong and would weather the storm of the market turmoil of the past couple of weeks, Petersen said.

"What we'd normally see at this time of year is lamb prices continuing to go up ... but they've just flattened and that's a result of the market flattening and the currency really still carrying on,'' he said. "It's no cause for concern.''

MEAT EXPORTS TO CHINA
Year ended December 31

Wool
* Exports: $286.6m
* Tarrif Saving: $2.9m

Fats and casings
* Exports: $170.1m
* Tarrif Saving: $11.6m

Sheepmeat
* Exports: $119.7m
* Tarrif Saving: $4.8m

Hides and skins
* Exports: $95.2m
* Tarrif Saving: $4.7m

Beef
* Exports: $9.2m
* Tarrif Saving: $400,000

Edible offals
* Exports: $5.8m
* Tarrif Saving: $400,000

Meat meal
* Exports: $800,000
* Tarrif Saving: $20,000

Total
* Exports: $687.4m
* Tarrif Saving: $24.8m