China's importance rises

Andrew Burtt says the free trade agreement gives New Zealand advantages in China.

Beef+Lamb statistics show exports to China have grown rapidly from less than 1 per cent to 10 per cent.

Why are sheep, lamb and beef volumes to China up so much?
Strong demand and prices and our free trade agreement, which provides us with some advantages, plus there is growth in demand for protein.

Is China going to be the next big marketplace?
It could be a big market, however there are some risks. Traditional markets remain New Zealand's largest markets. New Zealanders are naive if they think others haven't noticed the changes ... South America, Australia, the US and Canada are key suppliers.

What cuts are they taking?
Generally they are taking "lower value" cuts compared with developed countries - cuts like lamb flaps and forequarters, but there are signs of increases in high-value products, such as lamb racks.

Are they paying the same as traditional markets?
Yes, they are competitive for similar products. This is an important point. Different markets demand different products. Except in small volumes so far, China does not compete directly for the same products exported to developed/traditional markets. If they were not competitive, New Zealand exporters wouldn't be exporting to them.

How many lambs are estimated to go to slaughter this year?
Current estimates have the lamb slaughter at 18.6 million head in 2013-14 compared with 20.9 million in 2012-13. My team is presently consolidating our estimates of lambs born based on a comprehensive lamb crop survey [LCS] of sheep and beef farmers from across the country. The results of the lamb crop survey will inform a revision of our estimates.

What effect is this likely to have on the marketplace?
There are a number of elements to the market. Demand, the overall economic improvements (or not) in main markets, ability to pay and competition between markets. And supply - lambs born - here and in other countries like the UK had a terrible winter.

What is the average price for a lamb this season compared with last season?
At the mid-exchange rate scenario (USD/NZ0.79 average for the whole season), 2013-14 export lamb prices are expected to average $98 for an 18.4kg lamb, which is up 16 per cent on the provisional 2012-13 price of $84.60 per head, which was down sharply from $113.60 per head in 2011-12 and the all-time record of $117.65 per head in 2010-11.