Britain faces change after foot and mouth crisis

Little more than a year after foot and mouth disease hit Britain its farmers are still reeling from the dire financial and emotional consequences.

Meat New Zealand European director Tim Ritchie says the disaster's aftermath could mean permanent change in rural Britain as people in power question the basis of subsidised British agriculture, and some farmers give up.

"There is no doubt that UK farming will be different from now on. The UK Government, stinging from a £2 billion [$6.48 billion] bill for foot and mouth, has put agriculture on notice of significant reform. It is warning that the state will never again bail out farmers in a similar disaster."

Dogging the issue is a further worry that scrapie, endemic in European sheep flocks, may hide the presence of mad cow disease, or BSE, so far found only in cattle. If a link is shown, it will cost Europe dearly, Ritchie says.

Britain's lamb market is worth $500 million to New Zealand farmers. They are sensitive to how reform of the European Union's Common Agricultural Policy and trade liberalisation will affect Europe's production, trade flows and market prices. How quickly British farmers restock and recover after foot and mouth is also of interest to New Zealand exporters.

Up to eight million animals were lost during the outbreak, and a quarter of the productive capacity of the sheep industry went.

A survey for the British Government suggested that 65 to 78 per cent of farms would quickly restock, but many would do so with fewer animals.

One in four might diversify into non-traditional or non-farming activities, and the same number would move some or all land into environmental schemes. Some 6 per cent would leave farming.

Ritchie says New Zealand avoided taking advantage of the crisis, even suspending promotional work. "In the long run it would not have been productive to kick UK farmers when they were down.

"New Zealand lamb complements UK lamb rather than competing head on with it, due to the different supply seasons."

New Zealand did benefit from higher prices paid for its lamb during the foot and mouth outbreak.

Europe was short of sheep meat, as Britain could not export the usual third of its production, and non-European imports - limited by quota - won higher prices, especially in France.

The important question for New Zealand then is, where to from here for Britain?

For this year, at least, Meat New Zealand expects continuing tight supply in the all-important British and French markets. Availability in each market remains about 10 per cent below the pre-foot and mouth levels.

This should help sustain the demand for New Zealand lamb and keep prices firm, Ritchie says.

"It is interesting to see how local UK commentators view the reduced domestic supply. Many remain stuck in production-driven thinking, bemoaning the loss of market share and reduced self-sufficiency. And then there is the doom and gloom attributed to the reduced level of consumption.

"But with the domestic industry geared to supplying only fresh lamb, there is little ability to freeze and store product and therefore consumption is a direct reflection of supply.

"Reduced supply equals reduced consumption, as simple as that. In France for example, the fact that domestic prices lifted by over 30 per cent showed there was unsatisfied demand for the product.

"In each case little attention is given to the very real economic benefit of lower production in terms of greater returns through higher prices."

Ritchie says the wild card would be the emergence of scientific evidence proving there was BSE in European sheep.

"This would be a big turn-off for consumers for all lamb, even for New Zealand lamb which is BSE and scrapie-free. Beef consumption collapsed in Germany, France and Japan when BSE was found there.

"Imported beef did not escape and consumption halved overnight, whether from a BSE-free country or not.

"Should similar circumstances arise in the sheep sector, it would be crucial for New Zealand to play its "BSE-free" card.

"It becomes, therefore, ever more important to be able to differentiate our product on this basis. Country-of-origin identity and the New Zealand Lamb Rosette are very real and valuable assets on the New Zealand meat industry's balance sheet."

Ritchie says New Zealand's future in the market is bright but warns against complacency.

"There must be no deflection from continuing to meet the needs of the increasingly discerning market place. New Zealand must fiercely protect its disease-free status and reputation for excellence. To lose those would be to face mediocrity on the world market and the unacceptable financial consequences that would follow."