The New Zealand meat trade in the 1980's : a proposal for change

Abstract

The New Zealand meat industry has been undergoing significant changes during the past decade. These changes have prompted the carrying out of research on the New Zealand meat industry and the likely development of new marketing systems. This paper deals with an investigation carried out with a view to recommending an improved marketing system relevant to the situation faced by the industry in the 1980's. The research involved extensive interviews with senior management in many of the firms involved in the New Zealand meat industry and, from those interviews, the identification of the characteristics of the various sectors of the industry and the problems faced by the industry, especially in the marketing field. The survey of the industry was carried out between June and October 1981. From the results of the survey it was possible to identify two general sectors within the New Zealand meat industry. One sector is characterised by its ownership of killing facilities and the second sector is characterised by its marketing orientation. This second sector identified as a major problem the obtaining of product for its marketing operation. With the exception of this area, however, there was a high degree of consensus within the industry regarding the problems faced. A major problem identified by almost everyone interviewed was the instability of the United Kingdom lamb market. Since the United Kingdom market is often used as an indicator in the setting of prices in other markets, this instability can affect prices received for a large proportion of total New Zealand lamb exports. New markets were seen as presenting a further group of problems. Some are single buyer markets, and there is much concern as to the appropriate methods of supplying meat and setting prices for these markets. In other new markets there is a fear that market development is being stifled because of the inability of exporters to recoup market development costs. As soon as a market is developed to the stage where returns can be expected which are fully comparable with returns from other markets, new firms which have no need to recoup development costs enter the market. A third problem area which was identified by some was the development of vertical integration within the New Zealand meat industry. Firms which were once concerned only with the marketing of lamb have, largely because of worries about their ability to obtain meat for export, entered the field of killing and processing. On the other hand there is a feeling that some companies whose strength and major expertise lies in the operation of meat works have engaged in marketing largely because the meat is available to them. They may increase their perceived return by this action, but their marketing return may not be as high as that which could be achieved by a specialist company. Less specialisation within the industry may mean that the efficiency with which certain operations are carried out is reduced. When that possibility exists we cannot be sure that we are obtaining the highest possible returns from our meat for the nation. As a major step towards overcoming many of the problems outlined above, it is suggested that a carcase meat market be established in New Zealand through which the bulk of our carcase meat should be required to pass. Such a market would mean that all carcase meat was available for sale to licensed meat exporters, and so ensure that all potential exporters had access to product in a competitive market situation. This would also ensure that prices for meat were set in New Zealand, and that the demand from different markets around the world would be accurately expressed in the average prices achieved on the New Zealand market. In this way the problem of price dominance by the United Kingdom market would be overcome. A satisfactory price setting mechanism for single buyer markets would also be established. The separation of killing and marketing functions would encourage specialisation of operation, and meat would be made available to those companies which have the greatest marketing ability and therefore the ability to obtain and pay the best prices possible. There would be nothing to stop a company which had expertise in both fields from continuing to operate in both killing and marketing. The detailed operation of the carcase market is subject to further investigation, but at this stage it is suggested that it should operate on an electronic auction basis with product being sold daily. Market support judged necessary by the Meat Board could be provided at this stage of the marketing chain, as could any desired support for farmers provided by the Government. The objective in establishinq such a market would be to ensure that competitive pressures would guarantee the most efficient and profitable operation of the meat industry at all its stages. Returns to farmers and the nation should therefore be maximised.