Hopes are running high that India could be the next big thing for New Zealand sheep meat exports if the two countries form closer economic ties.
The Regional Comprehensive Economic Partnership (RCEP) involves 16 countries - the 10 members of ASEAN, plus the six countries with which ASEAN has free trade agreements—Australia, China, India, Japan, Korea, and New Zealand.
The meat industry has expectations that RCEP will form a platform that will allow New Zealand access to India, which at the moment imposes high tariffs on imported goods.
"My personal view is that India is the next big prize," Tim Ritchie, chief executive of the Meat Industry Association, said.
Ritchie said RCEP could become as important as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) - the free trade agreement involving New Zealand and 10 other countries in the Asia Pacific region.
CPTPP was formed when the US pulled the pin on the Trans-Pacific Partnership in (TPP) in 2017.
"In relation to RCEP, one of the important destinations that we would hope it covers would be India," he told the Herald.
"There is no trade deal at present but RCEP could provide the vehicle to address that," he said.
Ritchie said there were parallels between China - which has been been a huge plus for New Zealand's meat exports a free trade agreement was signed in 2008 - and India.
In just 10 years, China has become the biggest export destination for sheepmeat and beef.
Demand in China has been driven by its burgeoning middle class - with millions of people pouring into the wage bracket that can afford to buy New Zealand meat - every year.
The meat industry hopes that a similar dynamic may take place in India , with its big population , rising middle class and with its GDP growth of around 6 to 7 per cent a year.
Strategically, India could become "very, very important," he said.
Invercargill-based Alliance Group, New Zealand's biggest sheep meat exporter, has set its sights on India and has exporting small amounts of sheep meat since 2012.
Chairman Murray Taggart said Alliance had teamed with with QualityNZ - which is backed by high profile cricketers - Stephen Fleming, Daniel Vettori and Brendan McCullum - to market sheep meat in India.
Quality NZ was formed to foster closer trade ties with India and Taggart said having high profile cricketers on board had helped open doors in cricket-mad India.
Taggart said that with tariffs on landed product of 38 per cent, alliance could only target the very top end of the consumer market.
He has high hopes for RCEP.
"Obviously, we are looking to the trade officials and the Government to do everything they can to progress that," he said.
"We are not suggesting for a minute that this is going to be an overnight gold mine, but I think it is a significant enough opportunity us to tough it out and commit to it for the long haul," he said.
As it stands, only people in the very high wage bracket can afford Alliance products, once high tariffs have been added.
"But obviously over time we expect that to grow," he said.
China demand still strong
Taggart said that despite worsening world trade tensions, the co-op continues to enjoy very strong demand from China, whose meat market has been severely affected by the outbreak of African Swine Fever (ASF).
"Frankly, they (China) would take more if we could find more to send to them," Taggart said.
Rabobank expects China's pork meat output to drop by 25 per cent in 2019.
The bank said the scale of the decline expected in China in 2019 is unprecedented – and will lead to even lower pork production in 2020.
"And this will continue to have effects into the coming years," the bank said in its latest commodities outlook.
"The scope of the ASF epidemic is now clearer – this will be a multi-year and multi-region issue that brings structural change to global animal protein," it said.
Exports of other species to China are growing in response to substitution opportunities.
New Zealand beef exports to China from May to July were up by 105 per cent year on year by value and by 91 per cent by volume.
Taggart said Alliance wanted to retain a range of markets around the world to spread its risk and to ensure that it did not become unduly reliant on one market.
"With India, we believe it has potential to become another leg of the stool."
"We are continuing to nurture markets like North America and Europe because we believe a spread of markets is sensible."
"African swine fever has had a huge impact in China and the Chinese government will not want the country to be short of protein," Taggart said.
New Zealand farmgate prices have remained firm for sheepmeat.
"They (farmers) are getting strong prices for this season and, frankly, I can't see any reason why it should be any different next season," he said.
Taggart and top management are due to go on a farmer "roadshow" later this month.
Last year, higher procurement costs drove Alliance's net profit down to $6.6m from $14.4m a year earlier.
Taggart said this year's result to September 30 would be "significantly better".
Meanwhile, Stats NZ said export prices for lamb reached their highest point in the June quarter.
This level is the highest since the series began in 1982, and follows steady increases from the second half of 2016.
"Both lamb and beef prices rose this quarter, up 4.7 percent and 5.3 percent, respectively, on the back of strong overseas demand," overseas trade statistics manager Darren Allan said.