A forecasting model of New Zealand’s lamb exports

Abstract

Export markets for New Zealand lamb have changed rapidly over the past decade. Traditional markets have been in decline, while new markets, in Continental Europe, the Middle East and Asia have grown rapidly. The nature of the lamb being exported has also changed. Exports of frozen carcasses are diminishing in importance, while demand for high value cuts continues to grow. This study examines the outlook in major export markets for New Zealand lamb, in terms of the prices and level of demand, and the global market for New Zealand lamb in terms of aggregate supply and demand, the change in stocks, and the world price. This required the identification of market segments within the international lamb market and the estimation of demand and price response parameters for each market segment, using a suitable theoretical model. Econometric estimates were obtained using a joint product model, which allowed production to be estimated as a single commodity, while demand and price equations for each market segment were estimated for up to six related cuts of lamb: chilled and frozen carcasses, chilled and frozen bone-in cuts, and chilled and frozen boneless cuts. Estimates were used in a spreadsheet model to generate forecasts for each of the identified markets. Forecasts are presented for five markets: the European Community; Iran; the Middle East; Papua New Guinea; and Saudi Arabia. Conclusions are then drawn about the methods used to identify markets, and the nature of the model.