The schedule price system and the export lamb producer

Abstract

Over the last three seasons there has been a gradual increase in average carcass weight of export lambs slaughtered (Table 1). Favourable environmental and, to a certain extent, economic conditions have enabled and encouraged producers to keep lambs on to heavier weights. Unfortunately, there has been a gradual increase in overfat lambs (the F grade) as weights have risen. Cullwick (1980) states that there is a global need for lean well muscled carcasses of good conformation and urges reassessment of lamb production practices to achieve such types. Producers should benefit from the sales of increased quantities of lean heavier lamb. As most costs of handling lamb from the farm gate to point of load out from a meat processing plant are directly related to the number of carcasses handled and not to the weight of meat produced, then it follows that the heavier the carcass the lower the cost per kilogram of processing (Frazer, 1972). In theory, this should improve the producers' portion of the export lamb price. Export companies too, should receive financial gain from an increase in average carcass weights as long as they can establish the market demand for the larger joints. An increase in the production of heavier weight carcasses would tend to spread the seasonal pattern of kill by reducing the numbers slaughtered in the peak period (Frazer, 1972), as farmers delayed the off take time of their lambs. The spread of kill could therefore both lower killing charges and ease the labour problems specific to extreme seasonal work. There would also be a higher yield of saleable offals obtained (Frazer, 1972). However, the greatest benefit to the exporters is in the area of further processing. This is seen by many as the panacea to reducing overseas freight charges. Such charges are an increasing proportion of marketing costs (Chudleigh, 1980). By exporting a variety of cuts of meat specific to certain markets the quantity of saleable meat per container load is increased. Further processing will also provide employment within New Zealand so is viewed nationally as a worthwhile venture (Hilgendorf, 1981). However, the efficiency of a further processing plant cannot be maximized if the majority of carcasses are less than 15 kg (Harwood, pers. comm., 1981). Small carcasses are not only inefficient in terms of costs per kilogram of processing but they are unable to provide a variety of marketable cuts, e.g. leg steaks, because of their size. Overfat carcasses are costly to process further so are not required. The production of heavy, lean lambs therefore would appear to benefit farmers, exporters and the New Zealand economy. However, the Meat Exporters' Schedule system for buying lambs can be and has been criticised for a number of years because of its inability to provide financial incentive to producers to increase their average lamb weights (Herlihy, 1970; Kirton, 1979; Cullwick, 1980). Although a number of alterations in both the calculation of costs and the carcass grades has occurred (NZMPB, 1979) the basic saw-tooth structure of the system remains. This paper aims to discuss the effect of the present system on producer returns from both individual animals and from drafts of animals of different carcass weights. The measurement of the extent to which the saw tooth structure affects producer returns and, therefore, provides disincentive to increase carcass weights can then be used as a basis on which to judge the system. Alternative schedule systems should be aimed at removing some of the anomalies of the present system without introducing any greater amount of complexity into it. They should also aim to provide an effective guideline of market desires in the long term and hence enable producers to plan accordingly; for example, by selecting for heavier, leaner types of sheep. Although alternative systems might reduce distortions in per head prices of lambs and aim to give a more concise indication of market demand, there are other aspects of the lamb production system that will still limit the increase of carcass weights. Along with technical barriers to certain producers, there is the risk and uncertainty inherent in the system that is a result of the variation present in both drafting and grading techniques. It is hoped that this paper will help create a better understanding of the present system by producers and others in the industry and will promote some further discussion on alternatives that might be better employed in the system.