Meat company Alliance Group has high hopes for a free trade agreement with India.
Meat company Alliance Group has high hopes for a free trade agreement with India.
Highly-protected India has long been in the too-hard basket for New Zealand exporters, but meat company the Alliance Group believes a free trade agreement (FTA) with the world’s most populous country will be signed within a year.
Chief executive Willie Wiese, who was appointed to lead the co-op in March,said he expects an incoming National-led Government to deliver an agreement with India within the first 12 months of office.
Alliance, a farmer-owned co-operative, is the country’s biggest sheep meat exporter.
“We still pay a 38 per cent tariff in sending product to India, whereas Australia gets their FTA in January,” Wiese told the Herald.
“India, specifically from a sheep meat perspective, is a great market for us.
India’s Prime Minister Shri Narendra Modi congratulated Luxon on his party’s win in the general election.
Modi also said he looked forward to working with Luxon “to further strengthen India-New Zealand ties”.
Alliance has a holding in QualityNZ, a company that specialises in exporting to India and through which it supplies meat to five-star restaurants there.
Wiese said he was upbeat about what an incoming National-led Government could bring to the rural sector.
“Going on what Christopher Luxon has committed to, I am confident that it [a deal] can be done,” he said.
“If Australia can do it, why can’t we?”
Dairy has been a key sticking point in trade deals with India.
Alliance Group chief executive Willie Wiese.
“I think that instead of trying to move everything at once, we need to take incremental, practical steps to get us to the end point,” Wiese said.
Alliance, like many other exporters, is looking to lessen its reliance on China as its chief export destination.
Wiese said geopolitical tension arising from the war in Ukraine and worsening China-US relations was having an impact on markets.
“We have taken a number of steps to de-risk that and to reduce our reliance on China.
“We have gone into Central America and the rest of South East Asia, where we have grown significantly in markets like Malaysia, Thailand and Singapore.”
Trading conditions in China were challenging as the country continued to recover from the Covid era, which brought much of it to a standstill.
Wiese said China’s strict lockdowns, during which time the export trade was impeded by supply chain issues, saw Chinese consumers turn more to domestically-produced goods - from infant formula to meat.
“China is significantly more self-sufficient in their white protein - chicken and pork - and red protein, and that’s driven by the Government itself,” he said.
Wiese noted that youth unemployment was high in China and that consumer confidence there was low.
“On top of that, we have got Australia significantly increasing their exports of really low-cost sheep meat into China as well, which obviously pushes people into other markets, so that’s not helping.
“My biggest concern over the next 12 months is mutton, specifically as it’s getting drier in Australia where they are clearing stock, as well as the anticipated drought brought by the El Nino weather pattern.”
Alliance has provided its farmers with a range of prices for the first quarter. For premium lamb, it has offered $6.60 to $7.20 a kilo and $2.80 to $3.20 a kg for sheep meat - both about a dollar per kg below what would be considered the norm for this time of year.
Wiese said there was a high rate of inventory clearance for meat globally.
“If we can see good clearance rates of that inventory, then a replenishing of that inventory, that obviously gives us some price opportunities to get more value back to our farmers,” he said.
China’s social scene - important for the food service trade to cafes and restaurants - had improved but was not back to pre-Covid levels, he said.
In the big picture, China was recording lower growth rates and faced a steep property sector downturn, unemployment, and very high savings rates.
“I don’t know what the new normal is going to look like,” Wiese said, “but it won’t be what it used to be”.
Alliance and its partner in China, Grand Farm, had discussed the opportunities to extract more value from its products.
To that end, he said Alliance had developed a new five-year strategy which involved getting more value from what is called the fifth quarter - products from the animal that are not meat.
Wiese, having just completed 20 farmer meetings with farmer shareholders around the country, said Alliance’s suppliers were finding conditions tough.
“It differs from region to region,” he said, adding there was a lot of emotion around the incentives, such as carbon forestry, being offered to get suppliers out of livestock farming.
Then there were issues, common to all farmers, of inflation, higher interest rates and the commodities cycle.
“The only way that we can relieve that is by getting more value out of the market, more value for every livestock unit.”
Alliance, which has 4,500 farmer shareholders, exports to more than 65 countries.
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
