NZ meat processors in limbo over Brexit

Chilled New Zealand lamb helps to fill a seasonal void in the UK between December and May. Picture / Michael Craig.

New Zealand's two biggest sheep meat exporters are in limbo as they wait to see how Britain's exit from the European Union pans out.

The late onset of summer has meant a slight delay for the 2016/7 season but meat works throughout the country have been ramping up over the past three weeks as meat companies seek to fill their orders, not the least of which is bound for the important UK Easter holiday trade.

Farmers supplying the big two - Invercargill-based Alliance Group and Dunedin's Silver Fern Farms - are getting around $95 to $100 per lamb, depending on their location - roughly level with this time last year, but less than ideal for most.

Britain has long lost its status as New Zealand's number one export destination for sheepmeat but it remains an important market, particularly for chilled lamb for delivery in the UK off-season.

As its stands, the industry lacks clarity about the future of the 200,000 tonnes of product that is sent to Britain and the European Union annually.

Murray Brown, marketing general manager at Alliance Group, said export prices - in local currency terms - had been reasonable but sharp, post-Brexit declines in the British pound and the euro had cut deeply into export returns.

Since last June's vote, the New Zealand dollar has rallied by 18.6 per cent to 57.8 British pence. Against the euro, the local currency has firmed by 7.2 per cent to 68.0 euro cents.

Brown said the currency's steep appreciation, particularly against sterling, had meant British consumers had become much more conservative about what they put in their shopping trolleys.

Despite some anti-New Zealand lamb rhetoric from the UK farming lobby, chilled New Zealand lamb helps to fill a seasonal void in the UK between December and May.

"Everyone is in the same boat," Brown said. "It [Brexit] has not impacted on our business but volumes of frozen sheepmeat have come off a little bit over the last few years."

Alliance supplies the big supermarket chains - Marks and Spencer, Sainsbury's, Tesco and a range of other retailers.

"At the moment it's OK, but any change [to market access] could quite be difficult," Brown said.

Brown said current trade access arrangements will take two years to dissolve.
Trade Minister Todd McClay will meet his opposite number in the British Government, Secretary of State for International Trade Liam Fox, in the first half of this year to discuss market access, trade and investment, World Trade Organisation processes and prospective negotiations.

New Zealand is preparing to open free trade agreement (FTA) negotiations with the EU -- its third largest global trading partner - later this year.

"An FTA with the EU will help eliminate tariffs and establish a modern, comprehensive foundation to grow our economic relationship," McClay said in comments supplied to the Herald.

"It will also create greater trade opportunities in a number of areas, including primary products like sheep meat," he said. In the future, McClay said New Zealand would also look to negotiate an FTA with the UK, once it is in a position to do so.

McClay said he and Fox had decided on the next steps for a trade policy dialogue, which would serve as a forum as the UK develops its new approach to trade policy.

While the EU and UK are negotiating what Brexit will mean in practice, existing international commitments between New Zealand, the UK and the EU will remain in place.

"Obviously we would be keen on retaining what we have - when divided into two pieces," Silver Fern Farms chief executive Dean Hamilton said.

Hamilton said it was frustrating to hear anti-New Zealand lamb rhetoric from the UK farming lobby.

"We have always been frustrated about that," he said. "Even their own data shows that they don't have the numbers in their off-season to meet demand," he said.

"The situation has not changed.

"The fact that there are trade agreements pending means that there is going to be a bit more noise," he said. "But I do think that there is a way to meet UK consumer interests and our desire to see our product around the world," he said.

But lamb - as a protein source - is fighting a losing battle in the UK as more and more consumers turn to cheaper meats, particularly chicken.

These days, the Middle East and China dwarf the UK in terms of New Zealand's sheepmeat sales, but the British market remains very much a lamb leg market, and the highest paying lamb leg market globally for New Zealand lamb exporters.

Overall, Hamilton said demand for high quality New Zealand lamb was "okay".