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Sheep & Beef SectorWhere have we been, where are we at now;Possible pathways for the future.
24 April 2013
Ag and Hort Sciences Teachers Conference 2013
Mike Petersen, Chairman Beef + Lamb New Zealand
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Outline
• Overview
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability
• Red Meat Sector Strategy
• Challenges for the future
• Conclusion and Discussion
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A few years of crisis…
• 2009 - GFC and liquidity crisis!!
• 2010 - Liquidity crisis now a solvency crisis
• 2011 - Solvency crisis now a sovereign debt crisis
• 2012 - Sovereign debt crisis now a low growth crisis
• 2013 – Economic recovery???
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Inflation…
Yeah Right
2013… ???
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Global Trends
• Economic turmoil in mature markets– Some flow on expected in emerging markets – Emerging market growth so far maintaining
momentum and disruption yet to be realised
• Through all this the key fundamentals remain
• Availability of safe food continues to be the dominant theme for the foreseeable future
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Global trends…
• … the world is a changing place– Volatility will be the norm– Low stocks, high demand and weather extremes
fuelling volatility– Food deflation is now being reversed
.
• Food production has to increase 70% by 2050– NZ can only feed 20 million people– (or 100 million western diets)
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Outline
• Overview
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability
• Red Meat Sector Strategy
• Challenges for the future
• Conclusion and Discussion
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Beef + Lamb New Zealand
–Industry good organisation, farmer-owned
–Funded by levies mandated under the Commodity Levies Act(5 yearly referendum,last September 2009)
–13 Regional staff
– Overseas offices
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B+LNZ Programmes
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Outline
• Overview
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability
• Red Meat Sector Strategy
• Challenges for the future
• Conclusion and Discussion
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Main features
•Pasture based system year round
•Export focus i.e., sheep 90%+; beef 80%
•Stabilising flock numbers after a period of decline
•Unparalleled productivity gains
•Historical issue of sheep & beef farm profitability and land use change
NZ Sheep & Beef Industry
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NZ Wool Lamb, Beef and MilksolidsNominal Farm price trend, ¢ per kg
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Export Dominance 2011-12
% Exported Exports $m
• Wool 91% $776
• Lamb* 92% $2,670
• Mutton* 94% $454
• Beef and Veal* 80% $2,470
• Dairy 96% $12,478
• Deer [$265m] + Other 96% $917
Pastoral Sector $19,765
*Includes co-productsJune YearSource: Beef + Lamb New Zealand Economic Service, SNZ
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Pastoral Land Area
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
19
90
-91
19
92
-93
19
94
-95
19
96
-97
19
98
-99
20
00
-01
20
02
-03
20
04
-05
20
06
-07
20
08
-09
20
10
-11
20
12
-13
e
Ha
(000
)
Sheep Beef Deer Goat Dairy
Source: Beef + Lamb New Zealand Economic Service Statistics New Zealand
-27%-3.4m ha
+66%+0.9m ha
Overall -18%-2.5 m Ha
1990 to 2012
Land Use Trend
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Pastoral land Area 2012-13e
Dairy Farms 1.77 million haDairy Support 0.47 million ha
• Dairy Total 2.23 million ha 20%
• Sheep, Beef, Deer 9.05 million ha 80%
• Total pastoral area 11.29 million ha 100%
Source: Beef + Lamb New Zealand Economic Service
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Farm No’s and Size
Source: Beef + Lamb New Zealand Economic Service Livestock Improvement Corporation, Horticulture NZ
1984-85 2011-12e
Commercial S&B Farms 22,000
12,490 -43%
Av Stock Units 3,424 4,000 +17%
No of Dairy Herds 15,881 11,798 -26%
Av Cows at peak
Commercial Horticulture
144 393
7,000
+173%
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NZ Sheep and Cattle Numbers1990-91 to 2012-13
25,000
35,000
45,000
55,000
65,000
75,000
1990
-91
1992
-93
1994
-95
1996
-97
1998
-99
2000
-01
2002
-03
2004
-05
2006
-07
2008
-09
2010
-11
2012
-13
Sh
eep
(0
00)
2,000
3,000
4,000
5,000
6,000
Cat
tle
(000
)
Source: Beef + Lamb New Zealand Economic Service Statistics New Zealand
Dairy +88%
Beef -19%
Sheep -46%
2011 -4.4%2012 +0.2%
% Change 1990-91 to 2012-13
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Productivity Comparison
1990-91 2012-13e
Lambing Percentage (ewe) 100.4% 123.3%+23 lambs
Hogget lambs as % all lambs-
5.4%
Average Lamb Wt (kg) 14.35 18.14 +26%
Lamb sold (kg/ewe) 9.76 18.12 +86%
Wool Prodn (kg/head greasy) 5.28 5.41 +3%
Average Steer Wt (kg) 297 309 +4%
Milksolids per cow (kg) 260 340 +31%
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NZ Total Production
1990-91 to 2012-13e
More Dairy +175%
More Beef and Veal +20%
Less Lamb -7%
but from 46% fewer sheep!
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Outline
• Overview
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability
• Red Meat Sector Strategy
• Challenges for the future
• Conclusion and Discussion
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NZ Exchange Rate Trend(2000 Jan = 1000)
2012-13f
USD +1.9%
GBP -0.8%
EUR +1.4%
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Some things never change…
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Outline
• Overview
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability
• Red Meat Sector Strategy
• Challenges for the future
• Conclusion and Discussion
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2011 World Beef ExportsChilled & Frozen- December Year
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NZ Beef & Veal Export Markets(000 Tonnes Shipped, Sep Year)
0 50 100 150 200
North America
North Asia
South Asia
EU
Pacific
Other
2011-12 2010-11
51% Volume; 47% Value
26% Vol; 26% Value
Source: Beef + Lamb New Zealand Economic Service
2011-12 exports to North America
178,875 tonnes (51%)
US$980 million
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Export Beef & Veal ReceiptsTop 15 Countries, September Year
2011-12 2011-12
2005-06 2010-11 2011-12 $ 000 $ per tonne
USA USA USA 871,212 5,504
Japan Japan Japan 212,433 6,586
South Korea South Korea Taiwan 137,395 6,825
Taiwan Taiwan South Korea 120,684 4,442
Canada Canada Canada 105,719 5,275
Indonesia Indonesia Indonesia 61,155 5,175
French Polynesia Singapore Singapore 51,892 6,503
Hong Kong Philippines Hong Kong 43,678 7,603
Australia Hong Kong Philippines 42,359 3,809
Singapore French Polynesia French Polynesia 38,395 9,533
Mexico Netherlands Netherlands 32,673 15,676
Great Britain (uk) Great Britain (uk) China (peoples Republic) 29,135 4,592
United Arab Emirates Germany Great Britain (uk) 28,770 8,921
New Caledonia Italy Malaysia 25,736 4,597
Other 275,866 7,846
2,077,102 5,925
Source: Beef + Lamb New Zealand Economic Service
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Export Beef & Veal Exports 2011-12Tonnes Shipped, September Year
0 25,000 50,000 75,000 100,000 125,000 150,000 175,000 200,000
North America
North Asia
South Asia
European Union
Pacific
Other
Source: Beef + Lamb New Zealand Economic Service
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2011 World Sheepmeat ExportsChilled & Frozen- December Year
0
50
100
150
200
250
300
350
400N
ew Z
eala
nd
Aus
tral
ia
Uni
ted
Kin
gdom
Irel
and
Spa
in
Net
herla
nds
Bel
gium
Oth
er
000
Ton
nes
Source: Global Trade Atlas
38%
30%
11%
5%3% 3% 2%
8%
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Export Lamb September year, 000 tonnes shipped weight)
0 50 100 150 200
European Union
North America
Middle East
North Asia
Pacific
Other
2011-12 2010-11
Source: Beef + Lamb New Zealand Economic Service
128,800 tonnes
111,100 tonnes (-14%)
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Export Lamb ReceiptsExport Lamb Receipts - Top 15 Countries, September Year
2011-12 2011-122005-06 2010-11 2011-12 $ 000 $ per tonneGreat Britain Great Britain Great Britain 484,441 9,136Germany USA USA 240,306 16,138USA Germany China 237,688 4,644France France Germany 228,553 15,768Belgium Belgium France 153,608 10,804Japan China Netherlands 144,701 15,129Canada Netherlands Belgium 99,756 18,627Netherlands Canada Saudi Arabia 94,220 5,309Italy Saudi Arabia Canada 82,996 10,238Saudi Arabia Japan Jordan 63,497 5,622China Switzerland Japan 45,511 8,904Switzerland Jordan Switzerland 41,278 24,184Mexico Spain Italy 37,234 12,186Greece Italy Hong Kong 32,482 6,320Spain Greece Taiwan 27,543 9,112
Other 313,483 6,707$2,327,297 8,794
Source: Beef + Lamb New Zealand Economic Service
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Outline
• Overview
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability
• Red Meat Sector Strategy
• Challenges for the future
• Discussion
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Sheep & Beef Farm Profit before Taxper Farm, Constant 2004-05 $s
0
20,000
40,000
60,000
80,000
100,000
120,000
140,0001
99
0-9
1
19
92
-93
19
94
-95
19
96
-97
19
98
-99
20
00
-01
20
02
-03
20
04
-05
20
06
-07
20
08
-09
20
10
-11
20
12
-13
e
1990s decade av. $44,800
2000s decade av. $65,100
Source: Beef + Lamb New Zealand Economic Service Sheep and Beef Farm Survey, All Classes Farm
Improved in-marketprices NZ:US$ 81¢
2007-08 Lowest in 50 yrs NZ:US$ 77¢
NZ:US$ 43¢
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Sheep & Beef FarmsFarm Profit per ha distribution
0%
5%
10%
15%
20%
25%Le
ss th
an -
500.
00
to -
450.
00
to -
400.
00
to -
350.
00
to -
300.
00
to -
250.
00
to -
200.
00
to -
150.
00
to -
100.
00
to -
50.0
0
to 0
.00
to 5
0.00
to 1
00.0
0
to 1
50.0
0
to 2
00.0
0
to 2
50.0
0
to 3
00.0
0
to 3
50.0
0
to 4
00.0
0
to 4
50.0
0
to 5
00.0
0
to 5
50.0
0
to 6
00.0
0
to 6
50.0
0
Abo
ve 6
50.0
0
% o
f F
arm
s
1990-91 2008-09
Source: Beef + Land New Zealand Economic Service
1990-91 19,600 Farms, 38% Hill Country
2008-09 12,880 Farms, 48% Hill Country
One factor in the distribution changeFarms with losses
1990-91 17%
2008-09 23%
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Pastoral Sector DebtJune Year
9 yearsSector +153%
Dairy +173%
+$19.4 b
Sheep & Beef
+112%+$5.4 b
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Sheep & Beef Farm Equitytotal sector
0
10
20
30
40
50
60
70
801
99
9-0
0
20
00
-01
20
01
-02
20
02
-03
20
03
-04
20
04
-05
20
05
-06
20
06
-07
20
07
-08
20
08
-09
20
09
-10
p
20
10
-11
f
Do
llars
($
bill
ion
)
20%
30%
40%
50%
60%
70%
80%
90%
Eq
uit
y %
Net Worth Liabilities Equity %
Source: Beef + Land New Zealand Economic Service Sheep and Beef Farm Survey
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Outline
• Overview
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability
• Red Meat Sector Strategy
• Challenges for the future
• Conclusion and Discussion
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Sector strategy – current state
Inability to dif ferentiate
No clear direction for change
Competing in two markets
Mixed information
High operating costs
Lack ofmarket power
Excessive competition
High costs
Inability to differentiate Inefficient
procurement
Unclear market signals
No clear direction
for change
Lack of confidence to
invest
Masked by procurement
signals
Processors (looking for certainty)
Farmers (looking for leadership)
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Red Meat Sector Strategy
Core strategy themes High level activities
Coordinated in-market behaviour
Creating a strong brand position in premium markets
Acting with scale through greater coordination of exports in target
markets
Efficient & aligned procurement
Shifting the focus of competition from the ‘farm gate’ to offshore
competitors
Ensuring suppliers are receiving a fair and sustainable reward for their
performance
Increasing transparency of information
Sector best practice
Improving productivity at all stages in the supply/value chain
Enabling a ‘single voice’ to provide clear leadership
Creating a strategy coordination group able to support sector initiatives
Developing New Zealand’s farming systems
Selling the New Zealand story
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Sector strategy framework
Informedaligned
behaviour change
Coordinated in market behaviour
Sector best practice
Efficient procurement
Grow share of market value
Improve business
skills
Improve on-farm
productivity
Increase certainty of supply
Get better access to markets
Make better use of scale
Select what to sell
Develop farming systems
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The common target
• The structure of the meat industry is questioned. Yes there is work to do and improvements to be made as in any industry…
• But…• The structure of the industry today is the way
it is because farmers have built it that way.• Farmers and shareholders have to come to a
common view if they want to change it.• Meat sector rapidly moving to a specialised,
diversified, differentiated model
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On Farm - The size of the prize…
• Take this $8 billion sector to $14 billion
• In real terms adding another $3.4 billion
• … by 2025 or
• Another $420 (in real terms) per hectare of additional value for the sector!!
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Farm Profit before Tax per ha
-800
-600
-400
-200
0
200
400
600
800
1,000
1,200<
= -
500
<=
-40
0
<=
-30
0
<=
-20
0
<=
-10
0
<=
0
<=
100
<=
200
<=
300
<=
400
<=
500
<=
600
<=
700
<=
800
>80
0
$ p
er
ha
Profit per ha
Source: Beef + Lamb New Zealand Economic Service
2009-10 Sheep & Beef Farm Survey, All Farms excluding Class 8 mixed (crop) intensive
75 % of Farms
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Profitability Prize - Sector
-50,000
20,000
90,000
160,000
230,000
300,000
370,000
<=
-50
0
<=
-40
0
<=
-30
0
<=
-20
0
<=
-10
0
<=
0
<=
100
<=
200
<=
300
<=
400
<=
500
<=
600
<=
700
<=
800
>80
0
$0
00
Profit per ha Gain per ha
Source: Beef + Lamb New Zealand Economic Service
23% of farms
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Benchmarking0.
0000
0.00
050.
0010
0.00
150.
0020
0.00
25
Class 6 South Island Finishing-Breeding Farms EBITR per Ha Distribution (Empirical) for Financial Year 2008/2009
EBITR $ per Ha
Den
sity
-450 -350 -250 -150 -50 50 150 250 350 450 550 650 750 850 950 1050 1150 1250 1350
Example Farm 6:Quintile 5 - EBITR/Ha:
$ 1002.5
Example Farm 3:Quintile 3 - EBITR/Ha: $ 260.8
If Farm 3 had EBITR/ha of Farm 6 thenit would have achieved an additional $341,194 profit in this year.
Example Farm 4:Quintile 4 - EBITR/Ha: $ 398.9
If Farm 4 had EBITR/ha of Farm 6 thenit would have achieved an additional $103,813 profit in this year.
Examples of gaps in earnings between different farms
• Long tail implies huge potential for profitability increase• Multiple peaks imply mixed sources of variations
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Outline
• Global Trends
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability• Red Meat Sector Strategy• Challenges for the future
• Conclusion and Discussion
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Challenges for the future
• Market Access and opening up new markets
• Land use change
• Acceptance of farm practices and farming in NZ
• Food safety and traceability - NAIT
• Water quality and availability / environment
• Biosecurity
• Ongoing productivity gains and profitability
• Consequences of addressing climate change
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Outline
• Global Trends
• Beef + Lamb New Zealand
• Sheep & beef sector
• Exchange Rates
• Sheepmeat and beef export markets
• Farm profitability• Red Meat Sector Strategy• Challenges for the future
• Conclusion and Discussion
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Conclusion
• Food is the still the big issue• NZ grass fed products perfectly poised to profit
from this• Considerable change in land use and stock
numbers in NZ– Improved long term profits needed for sheep
and beef for reinvestment• Global focus for lamb and beef
– Continuing to diversify into emerging and more valuable markets
– …however a real need to continue to service traditional markets
• Challenges real but so are the opportunities
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Sheep & Beef SectorWhere have we been, where are we at now;Possible pathways for the future.
24 April 2013
Ag and Hort Sciences Teachers Conference 2013
Mike Petersen, Chairman Beef + Lamb New Zealand
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© 2012 Beef + Lamb New Zealand Limited previously operating as Meat & Wool New Zealand Limited.
All rights reserved. This work is covered by copyright and may not be stored, reproduced or copied without the prior written permission of Beef + Lamb New Zealand Limited, Box 121, Wellington.
Phone: 64 (0) 4 473 9150, Fax: 64 (0) 4 474 0801
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