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Pending Product Shortages Boost Global Meat Market

16 April 2008

Pending Product Shortages Boost Global Meat Market

The international protein market surge has manifested itself in heightened market values for lamb, beef and venison, signalling improved fortunes for New Zealand farmers, and particularly lamb producers.

PPCS Chief Executive Keith Cooper, following a two week in market analysis of the global meat trade with General Manager Marketing Glen Tyrell, says it was one the most encouraging market visits for many years, particularly as the buoyancy was not on the back of other countries food safety issues, but based around markets understanding the pending shortage of New Zealand meat, particularly lamb. "It's encouraging to see a general restoration of value in relative terms to prices increases on other protein sources, translating to substantially improved prices for NZ product."

Mr Cooper says improved sales values for lamb are real and will form the basis of PPCS issuing lamb supply contracts into the next season at substantially improved levels. He adds that a number of opportunities had also been confirmed for the launch of a new product range under the branded identity of Silver Fern Farms.

"The market for beef into Europe is incredibly strong on the back of Brazil being unable to export to the EU at present. Whilst Brazil will no doubt return to the market, this current window of opportunity will ensure a presence for NZ Beef in the future, while the strength in returns for venison reflected the past four years marketing initiatives," adds Mr Tyrell.
"We took note, however, that in tandem with the improvement in NZ meat values, we must be aware of the availability of fresh lamb grown across the Middle East, the Continent and UK. Our product is competing with fresh lamb from Pakistan, India, Iran, Sardinia, Uruguay, Spain, Italy, France and the UK."

"We must recognise there are other suppliers to the markets we export our product to, so accordingly we can not expect to demand prices that do not have some correlation to other lamb or other protein sources, we must add value starting from inside the farm gate to the end user which is the basis of the Silver Fern branding strategy," says Mr Cooper.

"Many meat marketing companies have strengths and weaknesses in various market regions and we can see some immediate opportunities for companies working together and utilising the best that each has to offer in various markets, providing benefits within a much shorter timeframe than even an optimistic conclusion to a wider industry rationalisation model," says Mr Cooper.

He believes that there is an immediate opportunity to capture value by acting in the interests of suppliers by marketing cohesively.

"While we didn't visit the North American market on this occasion, it remains an under performer due to a variety of reasons. The Australian drought, over supply, over pricing two years ago, the economic conditions in North America, are all factors, none of which have been resolved by the dominant position of the three way industry model of the NZ Lamb Co. It should be noted also that we do have in the Lamb Company model, three Australian exporters."

Looking to the immediate future, Mr Cooper says PPCS now looks for its suppliers to support the change in supply models and commit to the Minimum Forward Price supply agreements. "Suppliers must have the confidence to commit to capture the market opportunities. We are changing our marketing model to capture these opportunities and likewise, suppliers must also make changes to give us the ability to bank the resulting gains on their behalf."

He says the focus is now on implementation of the PPCS Rightsize plan which is an overall re-positioning of the business covering supply arrangements, infrastructure and branding strategy which is effectively a market driven model focusing on supplying consumers what they want, when they want it and at a sustainable value to our shareholders.


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