Lamb exports to Europe under a cloud

The judicial ruling and diplomatic row which look like stripping Fonterra of some of its "quota rents" on butter in Europe has spilled over into the far more lucrative deal New Zealand has for chilled lamb.

The butter row has not only left about 14,000 tonnes of butter piling up in NZ coolstores -- because the European Commission has temporarily blocked new imports there by Fonterra's agents -- but has also steered British sheep farmers down the same path as the German dairy company which sued over the butter.

New Zealand has preferential access to Europe for sheepmeat and dairy products -- dating from when Britain, its traditional customer, joined the European Economic Community.

It is charged a lower tariff on annual quotas for about 240,000 tonnes of sheepmeat, 77,402 tonnes of butter, 7000 tonnes of cheddar cheese, and 4000 tonnes of cheese for processing.

Exporters cream extra profit from the quota rents, the difference in the world price at which the commodities are exported from New Zealand and the price at which they can then be sold in the European Union's (EU) protected market.

But a German company, Egenberger, seeking a share of the quota rents has successfully argued Fonterra's control of of NZ butter imports via a London-based subsidiary was monopolistic and discriminatory.

Now British farmers are unhappy about the quota rents collected on NZ lamb, Jean-Pierre Garnier, export manager for Britain's Meat and Livestock Commission told the Scotsman newspaper.

He described NZ lamb imports as one of two "black clouds" hanging over the British market. The other was weak demand from France.

Mr Garnier said that, although NZ remained under its quota allocation of about 240,000 tonnes a year of lamb sent to EU markets - with the UK as its biggest single customer - its move towards selling chilled cuts was threatening to undermine British opportunities, particularly in France.

New Zealand has quietly, but steadily boosted its chilled lamb -- which compete directly with the fresh product by farmers in Wales, France Ireland and England -- to about 20 per cent of its quota, earning significant premiums over lamb sold elsewhere in the world.

Last year, New Zealand boosted its chilled lamb to Europe to 42,000 tonnes, up 2000 tonnes on the previous year.

In theory, NZ exporters could fill its quota with chilled lamb. In the 1990s, as the proportion of chilled lamb climbed to 12 per cent, the trade attracted protests from English, Irish and French farmers who saw the meat as competition with their own product.

By the end of the decade Irish farmers were raiding supermarkets and dumping chilled New Zealand meat in the street.

The campaign led to at least one supermarket chain removing New Zealand lamb from its Irish stores and substituting local meat. Meat and Wool New Zealand coordinated a process of "orderly marketing" by NZ exporters to calm down farmers in Britain and Ireland.

According to Anne Berryman, European regional manager for Meat New Zealand, exports to the EU were about 225,000 tonnes last year, equivalent to about 4.7 million lambs or 25 per cent of New Zealand's total lamb exports.

Mr Garnier said British farmers were reliant on lamb exports to Europe, which took about 30 per cent of production, in a trade which rose 16 per cent in volume to 32,000 tonnes last year. And in spite of relatively weak French demand, Britain was steadily gaining market share there against Irish supplies.

- NZPA