Sustainable red meat production will pay off: analyst

Blake Holgate.

New Zealand's red meat sector has an opportunity to leverage the increased investment that will be required by pending regulatory changes, Rabobank animal proteins and sustainability analyst Blake Holgate believes.

In a recent industry report, Dunedin-based Mr Holgate said regulation of the agricultural sector was set to tighten over the next 12 to 18 months.

That would require increased investment into the ethical and sustainable aspects of the country's red meat production systems.

While in the short to medium term, the associated increases in production costs would be challenging to pass on in full to New Zealand's offshore consumers, changing global consumer trends and market requirements ensured there were benefits to be realised from investing into those aspects of the sector, he said.

Red meat production globally was coming under increasing scrutiny in relation to the impact livestock farming was having on animals and the environment.

That had resulted in a wide range of stakeholders pressuring red meat producers to adhere to higher production standards in relation to the ethical and sustainable aspects of their farming systems.

Regulators had responded to that public pressure by tightening regulation of their respective local red meat production systems.

Those regulatory changes had been designed to address community concerns about red meat production and to ensure production systems met standards considered acceptable by the public.

To date, regulations relating to freshwater quality had been the primary focus of regulators in New Zealand.

However, continued public pressure in respect to other aspects of red meat production systems were set to see the breadth and depth of regulation faced by red meat producers grow over the next 12 to 18 months, he said.

The three aspects of production most commonly the focus of public and regulatory attention were environmental sustainability, greenhouse gas emissions, and animal welfare.

Many of the regulatory changes were designed to address specific effects red meat production was having on the local New Zealand environment.

However, at a global level, many consumers were progressively asking questions about how red meat was being produced, and wanted reassurance the meat they were buying was produced under conditions they considered acceptable.

That change was best evidenced through the actions of major global food retailers and food-service companies, such as Tesco and Sainsbury's in the UK and Walmart and Whole Foods Market in the US.

Those companies were progressively introducing a range of tougher production standards that suppliers were required to meet if they wanted continued access to those markets.

That would create opportunities for those suppliers able to meet the required standards, while those who were not were likely to find it increasingly difficult to access those markets.

That was particularly relevant for New Zealand, which exported more than 80% of its red meat production.

However, consumers' willingness to pay for ethically and sustainably-produced red meat varied between different markets.

In emerging markets like China, where food safety and quality were the dominant drivers of purchasing decisions, consumer willingness to pay for ethical and sustainability production attributes was likely to be even lower than in mature markets such as the United States.

That would make it difficult in the short to medium term for New Zealand red meat farmers to pass additional production costs on to consumers in full.