KEY POINTS:
The global dairy boom could slash the prices New Zealand cattle farmers receive for prime beef and veal exports, by flooding the market with second-class dairy beef.
A Federated Farmers leader, Keith Kelly, has warned that the meteoric rise in dairy commodity prices could take a toll on the beef sector's high-value niche markets.
"It is easy to speculate the dairy boom will result in more second-class dairy beef on the market and this could see a drop in the price of prime beef," he told the annual meat and fibre producer council conference in Auckland yesterday.
Kelly, the council's chairman, said an increasing thirst for milk could mean a proliferation of calves from dairy cows not bred for meat, which could be reared and then sold in the market alongside prime beef.
And their cheaper but inferior meat could contaminate the market for prime-beef sales.
"We need to ensure prime beef continues to receive top dollar."
On the other hand, if surging milk powder prices made calf-rearing too expensive, that would flood the bobby calf - or veal - market instead.
"A lot of people will be finding it uneconomical to raise calves because what happens then is that calves go as bobbies and then we flood the bobby calf market," Kelly said.
The prime-beef market needed protecting as it was "the creme de la creme" and should be the easiest to sell," he said.
"Once you start contaminating that you lose that demand for the prime beef because people start shopping on price."
Kelly said action was needed to ensure prime beef continued to earn top dollar, especially as Asian markets eased access to US producers.
"The fright over BSE is wearing off and Asia is being lobbied to return to grain-fed American beef.
"We need to look at the Asian palate and getting them to acquire a taste for New Zealand grass-fed beef."
New Zealand beef exports to Asia had benefited when BSE outbreaks hit the US, UK and Canada sectors, but those gains were in danger as access eased, he said.
"If the Americans come in too early we'll lose what little gains we've got."
Kelly said the US had now got to the stage where its beef BSE accreditation was acceptable in Japan.
"The only thing we've got going for us is the biofuel aspect of corn - corn might become too expensive to give to cattle."
New Zealand exports 213,402 tonnes a year of beef and veal to the US - its biggest market - followed by North Asia, which includes Japan, Korea and Taiwan and then the domestic market.
It has a European Union quota for high-quality beef of 1300 tonnes.
A report by Rabobank said that despite the United States regaining access to Asia, increasing demand for protein in alternative markets would boost New Zealand beef exports.
