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Sutton Speech to the World Pork Conference

2 May 2000

Ladies and Gentlemen: thank you for the invitation to speak to you today.

I would like to welcome to New Zealand all delegates to the inaugural World Pork Conference here in Auckland. It is good to see so many countries represented here.

I hope you will all take the opportunity while you are here to see some of our wonderful country.

Here in New Zealand, we have only a small pork industry.

The United Nations' Food and Agriculture Organisation reports that in 1998, 88.4 million tonnes (carcass weight equivalent) of pigmeat was produced worldwide. Of that, 39.729 million tonnes of this was produced in China, the world’s largest pigmeat producer. However, only 2.771 million tonnes of this was traded internationally.

That same year, New Zealand imported 18,479 tonnes (carcass weight) of pigmeat, and only exported 270 tonnes.

New Zealand?s inspected pigmeat production for the season ended September last year was 47,600 tonnes (carcass weight), a decrease of 1.5% from the season before.

The industry here has experienced very low returns over the past season, with reports of some farmers exiting the industry because of low prices, and others producing at a loss.

Much of the decline in profitability was due to substantial quantities of cheap pork being imported into New Zealand as a result of an over-supply of pigmeat on the world market following the Russian crisis (in 1998 Russia was the world?s second biggest importer of pigmeat).

For the year ended September 1999, the volume of imported pigmeat, mainly frozen pork cuts, was equal to a third of total domestic production. Most imported pigmeat is sourced from Canada. However, significant quantities also come from Australia and Denmark.

The New Zealand Pork Industry Board survey in October 1998 showed there were a total of 350,730 pigs on farms.

The number of farms with pigs had dropped from around 4,700 in 1996 to around 2,600, but only 900 farms had more than 10 pigs. These 900 farms accounted for 95% of sows and 99% of grower pigs, and 56% of sows were concentrated in about 100 large farms of over 150 sows each.

The main factors influencing New Zealand?s medium term pigmeat production are improved prospects for North American pigmeat prices, and projected higher prices for competing domestic lamb and beef in New Zealand. However, expected rises in New Zealand prices for feed grains will continue to place pressure on grower profitability.

The number of commercial pig farmers is expected to continue to reduce as the industry moves towards fewer pig producers with larger herds. The total number of breeding sows is expected to remain relatively constant over the next few seasons. Domestic pigmeat production is projected to stabilise at around 50,000 tonnes for the medium term to September 2003.

Officials expect the New Zealand industry to continue to reduce. It is estimated that about 30 farmers left the industry in the past year because of low prices. Even with the recent price lift, many others are expected to follow.

The Pork Industry Board predicts that eventually there will be just 200 New Zealand pig-farmers, down from the 470 producers now registered with the Board.

The plight of the pig farmer in NZ has to be seen in the light of world pig production and trade. In the EU, the US, Canada and Australia, pig meat supply exceeds demand and consequently there are pig production crises in all these countries. The inevitable result is retrenchment and restructuring of pig production. Smaller and less integrated producers will fall by the wayside.

Pig meat exports to Russia ceased after the Rouble devaluation at the end of August last year. This particularly affected the EU and the US, both of which had expanded exports to Russia since the emergence from the communist era. The chaos in the Russian food production sector lead to the ever widening need for imports. For the year ending December 1997, pig meat exports to Russia were 341,000 tonnes from the EU and 19,000 tonnes from the US. These export quantities represented 32% and 9% of world pig meat trade.

The pig producers have tended to bear the main brunt through lower wholesale prices, while downstream processors and retailers maintain their profit margins. This is evident from the recent findings of the UK Select Committee on Agriculture inquiry into the UK pig industry. In the US processors are simply refusing to purchase live pigs, rather than risk rising stocks, with the result that excess pigs are having to be disposed of by farmers.

The falling coarse grain prices in recent years has also contributed to the excess production of pig meat, as grain feed is a high proportion of pig production cost and therefore pig revenue. The retrenchment of pig production (and grain-fed beef production) is compounding the lower grain prices in the short term because of higher stocks.

The inevitable consequence for NZ pig producers is for greater efficiency or exit by smaller producers from the industry. The rational behaviour of NZ pig processors is to buy on quality and price. International prices will have a major influence on NZ wholesale prices because of the scale of imports to domestic production.

The major issue for pork producers no matter where you are in the world is that of consumer demand.

Satisfying consumer desires is vital to all food producers, not just pork producers. And that means dealing with animal welfare issues and traceability.

Regardless of what you think of the sense of it, consumers want to know what animals their meat came from and that those animals were well-treated before they were killed.

The holding of pigs in dry sow stalls has been a hot topic among animal welfare groups and the media here in New Zealand during the past month. We even had the edifying sight of one of our Green MPs ? a former beauty queen ? climbing into a sow stall to protest against their use.

However, that protest has a serious side ? since then, letters have been coming into my office from concerned members of the public who are now giving up eating pork because of their concerns about animal welfare. That is a danger sign for your industry. You can not rely on a market only of people who ignore such concerns.

Here in New Zealand, we have a new Animal Welfare Act, which came into force last January. This is important new legislation and it will have an impact on all areas of animal production, care, and welfare.

I am confident the New Zealand pork industry, through its Pork Quality Improvement Programme, will continue to take a responsible and progressive approach to animal welfare issues.

As well as to answer animal welfare concerns, traceability is also important to answer food safety concerns ? something else that consumers are becoming more aware of and need greater education about.

Here in New Zealand, the industry has adopted a "farm to plate" programme, which is making a difference to ensure an excellent eating experience every time.

An excellent eating experience for pork consumers ? and many of them - is something all of you, no matter where you are from, are working towards. I wish you good luck in your endeavours and for the rest of your conference.


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