Over the same period the world’s population will grow from 7 billion in 2011 to 9.3 billion in 2050 and increasing use of biofuels will account for up to 7 per cent of agricultural demand.
Participants agreed the sector needed to invest in productive capacity of the land and consolidate to deliver the scale necessary to capitalise on the opportunity. The industry balance sheet is strong and ANZ believe relatively modest investment in productivity and consolidation would drive transformational returns.
Of the survey respondents, 65 per cent expect to increase production and 83 per cent of those say they will do it through increased pasture and forage productivity – a higher level than in dairy. There was also a greater focus on lifting performance through animal genetics than in other sectors.
One impediment to growth that remains unresolved is certainty of supply.
Currently processors and exporters have to compete aggressively in two markets – to sell product offshore while competing for livestock to supply sales onshore.
They have to win export market share and price premiums with no certainty of supply of stock. In this environment, it is very difficult to invest in either marketing, product differentiation or processing efficiency.
Finding a solution is one of the main goals of the pan-industry Collaboration for Sustainable Growth initiative which will explore the development of new livestock supply arrangements to provide greater certainty to both farmers and exporters. Investment in greater productivity and sustainability on farm would also help assure certainty of supply.
“Profit opens up options, so we need more profit,” one Waikato farmer told ANZ, summing up what appears to be the new driving principle in red meat.
Most of the farmers ANZ spoke with in Barometer focus groups had at least one active strategy to get a better return; whether it be by maintaining highly productive pasture; working on delivering stock to meet the buyer’s specification, or deepening relationships with the processor. They will lead the industry into a new era of profitability.
From the farm gate to the customer’s table, red meat – NZ’s one-time export star - is again cooking with gas.
View the full report: The Privately Owned Business Barometer Red Meat Sector Key Insight Report was part of ANZ’s support for Beef and Lamb New Zealand’s Red Meat Profit Partnership initiative.