Alliance says world trade friction could erode sheepmeat returns

Alliance has been sending chilled lamb, mutton and beef shipments to China by air and sea since the middle of 2017, distributed by Alliance's partner on the Chinese mainland, Grand Farm. Photo / File

Uncertainty on the world trade front could translate into lower prices for Alliance Group's 4000 farmer-shareholders this year, but returns should nevertheless remain firm, the co-op's global sales manager Shane Kingston said.

Christchurch-based Kingston, who joined New Zealand's biggest sheepmeat exporter in September after a 10-year stint with international drinks giant Diageo, said Britain's exit from the European Union was just one of a number of challenges on the trade front. Britain remains an important market for New Zealand lamb.

As the 2018/19 lamb kill starts to ramp up, Kingston said he expected product prices to remain firm, but that they were unlikely to reach the 2017/18 season's record highs.

"It's all crystal ball stuff, but we would be forecasting a slight decrease in returns versus what they have received over the last 12 months," he said.

"Most of that is the driven by the dynamic at play across the world," he said.

Invercargill-based Alliance faced "a number of scenarios" on the trade front and would monitor the situation closely with its industry partners here and in the UK.

"We feel we have a set of plans that give us options based on what may play out," he said.

Brexit and other trade issues, such as the ongoing trade friction between the US and China, were just a couple of challenges on the international scene.

"But we remain positive on the medium to long-term," he said.

Shane Kingston, Alliance Group general manager, global sales. Photo/Supplied.

Alliance has been sending chilled lamb, mutton and beef shipments to China by air and sea since the middle of 2017, distributed by Alliance's partner on the Chinese mainland, Grand Farm.

The programme targets high-value retail - delicatessens and gourmet butcheries - and the food service sector for further processing.

Kingston said chilled exports to China offered significant opportunities for the co-operative as they command a premium over frozen products.

"We continue to see China as an opportunity, as we do for a number of markets around the world," he said.

"Chilled is definitely a higher value opportunity within that (China) market," he said.

Kingston expects frozen meat to become a bigger proportion of sales into China over time.

Alliance last week reported a net profit of $6.6 million for the year to September, down from $14.4 million a year earlier.

Revenue, however, lifted to $1.8 billion from $1.5b in the prior year.