Required Report - public distribution

**Date:** 9/1/2006

**GAIN Report Number:** NZ6013

NZ6013

**New Zealand**

**Livestock and Products**

**Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Katherine Hadda

U.S. Embassy

**Prepared by:**

Alastair Patterson

**Report Highlights:**

New Zealand's beef and veal export volume in 2007 is forecast to
increase 7 percent to 580,000 tons. Beef production and export estimates
for 2006 have been revised downward. New Zealand's beef industry
continues to benefit from U.S. and Canadian difficulties in re-entering
Asian markets. New Zealand beef exporters expect minimal disruption from
the re-entry of U.S. beef to the Japanese market, with a small decline
in market share and prices. These exporters will fight to retain the
market share they have gained.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Wellington \[NZ1\]

\[NZ\]

# SECTION I. SITUATION AND OUTLOOK

New Zealand's 2007 cattle slaughter is forecast to increase 6 percent
over 2006 to 690,000 tons[^1]. Beef and veal exports are forecast to
increase 7 percent to 580,000 tons. This follows revised figures for
2006 production levels due to the availability of more up-to-date data.
The increased adult cattle slaughter is a result of increased
availability of bulls for slaughter, as well as an increase in the
number of dairy cows supplied for slaughter. Calf slaughter is forecast
to remain at a similar level to the estimated slaughter of 2006.

# 

New Zealand's total cattle slaughter for 2006 has been revised (see
NZ6003 for previous figures), with an estimated decline of 5 percent to
650,000 tons. As a result, exports are estimated to decline 6 percent to
540,000 tons. The lower than forecast kill is due to a number of
factors. The dairy cow and heifer cull has been lower due to increased
retentions for milking. Industry observers perceive that many farmers
are holding cattle back from slaughter as a result of lower prices in
the first half of 2006 and the perception that these prices will
strengthen later in the year, if the New Zealand dollar weakens in value
as most analysts predict.

The New Zealand Food Safety Authority (NZFSA) is currently reassessing
New Zealand's BSE categorization measure. As part of this, NZFSA
released a discussion document in April 2006, which recommends changes
to the requirements for imported beef products. NZFSA states that the
review is in response to experience gained during the BSE epidemic in
cattle, advances in the scientific understanding of BSE and the
associated risk of vCJD, and changes to the World Organization for
Animal Health's standard (which New Zealand's current BSE measure is
based on).

New Zealand's beef industry continues to benefit from U.S. and Canadian
difficulties in re-entering Asian markets (see NZ5012 and NZ6003). New
Zealand beef exporters expect minimal disruption from the re-entry of
U.S. beef to the Japanese market, with a small decline in market share
and prices. New Zealand exporters will fight to retain the market share
they have gained. They expect that share will gradually be lost to U.S.
exporters in the long-term, but hope to retain some of the gains they
have made as the dynamics of the market are expected to be different to
those before the ban. New Zealand grass-fed beef has different product
attributes to North American grain fed beef. Although traditionally seen
by Asian consumers as a lesser product to grain-fed beef, New Zealand
exporters hope that Asian consumers have developed a taste for their
beef during the absence of North American product. New Zealand promotion
will emphasize that New Zealand beef is natural, free range, disease
free and high in nutrients.

SECTION II. PS&D TABLES AND TRADE MATRIX

## PS&D TABLES

+----------------+--------+--------+-------+--------+-------+--------+
| **New          |        |        |       |        |       |        |
| Zealand**      |        |        |       |        |       |        |
|                |        |        |       |        |       |        |
| #              |        |        |       |        |       |        |
| ##### Animal N |        |        |       |        |       |        |
| umbers, Cattle |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
|                |        |        |       |        | (1000 |        |
|                |        |        |       |        | HEAD) |        |
+----------------+--------+--------+-------+--------+-------+--------+
|                | 2005   | R      | 2006  | Es     | 2007  | Fo     |
|                |        | evised |       | timate |       | recast |
+----------------+--------+--------+-------+--------+-------+--------+
|                | USDA   | Post   | USDA  | Post   | USDA  | Post   |
|                | Of     | Es     | Off   | Es     | Off   | Es     |
|                | ficial | timate | icial | timate | icial | timate |
|                | \      | \      | \[    | \      | \[    | \      |
|                | [Old\] | [New\] | Old\] | [New\] | Old\] | [New\] |
+----------------+--------+--------+-------+--------+-------+--------+
| Market Year    |        | 0      |       | 0      |       | 0      |
| Begin          |        | 1/2005 |       | 1/2006 |       | 1/2007 |
+----------------+--------+--------+-------+--------+-------+--------+
| Total Cattle   | 9415   | 9415   | 9485  | 9435   | 9385  | 9615   |
| Beg. Stks      |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Dairy Cows     | 4005   | 4005   | 4050  | 4100   | 0     | 4130   |
| Beg. Stks      |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Beef Cows Beg. | 1220   | 1220   | 1200  | 1240   | 0     | 1220   |
| Stocks         |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Production     | 4460   | 4460   | 4500  | 4470   | 0     | 4480   |
| (Calf Crop)    |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Intra EC       | 0      | 0      | 0     | 0      | 0     | 0      |
| Imports        |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Total Imports  | 0      | 0      | 0     | 0      | 0     | 0      |
+----------------+--------+--------+-------+--------+-------+--------+
| TOTAL Imports  | 0      | 0      | 0     | 0      | 0     | 0      |
+----------------+--------+--------+-------+--------+-------+--------+
| TOTAL SUPPLY   | 13875  | 13875  | 13985 | 13905  | 9385  | 14155  |
+----------------+--------+--------+-------+--------+-------+--------+
| Intra EC       | 0      | 0      | 0     | 0      | 0     | 0      |
| Exports        |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Total Exports  | 50     | 50     | 50    | 40     | 0     | 40     |
+----------------+--------+--------+-------+--------+-------+--------+
| TOTAL Exports  | 50     | 50     | 50    | 40     | 0     | 40     |
+----------------+--------+--------+-------+--------+-------+--------+
| Cow Slaughter  | 830    | 800    | 850   | 680    | 0     | 750    |
+----------------+--------+--------+-------+--------+-------+--------+
| Calf Slaughter | 1300   | 1550   | 1400  | 1500   | 0     | 1500   |
+----------------+--------+--------+-------+--------+-------+--------+
| Other          | 1780   | 1610   | 1870  | 1630   | 0     | 1750   |
| Slaughter      |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Total          | 3910   | 3960   | 4120  | 3810   | 0     | 4000   |
| Slaughter      |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Loss           | 430    | 430    | 430   | 440    | 0     | 440    |
+----------------+--------+--------+-------+--------+-------+--------+
| Ending         | 9485   | 9435   | 9385  | 9615   | 0     | 9675   |
| Inventories    |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| TOTAL          | 13875  | 13875  | 13985 | 13905  | 0     | 14155  |
| DISTRIBUTION   |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Calendar Yr.   | 0      | 0      | 0     | 0      | 0     | 0      |
| Imp. from U.S. |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+
| Calendar Yr.   | 0      | 0      | 0     | 0      | 0     | 0      |
| Exp. to U.S.   |        |        |       |        |       |        |
+----------------+--------+--------+-------+--------+-------+--------+

Source: Statistics New Zealand, Meat and Wool New Zealand, Ministry of
Agriculture and Forestry, FAS/Wellington Estimates.

Notes for tables:

Data included in this report is not official USDA data. Official USDA
data is available at <http://www.fas.usda.gov/psd>.

PS&Ds in carcass weight equivalents (CWE), while trade matrices are in
product weight equivalents (PWE).

+----------------+-------+--------+-------+--------+-------+--------+
| ####           |       |        |       |        |       |        |
| ## New Zealand |       |        |       |        |       |        |
|                |       |        |       |        |       |        |
| **Meat, Beef   |       |        |       |        |       |        |
| and Veal**     |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
|                |       |        |       |        | (1000 |        |
|                |       |        |       |        | MT    |        |
|                |       |        |       |        | CWE)  |        |
|                |       |        |       |        | (1000 |        |
|                |       |        |       |        | HEAD) |        |
+----------------+-------+--------+-------+--------+-------+--------+
|                | 2005  | R      | 2006  | Es     | 2007  | Fo     |
|                |       | evised |       | timate |       | recast |
+----------------+-------+--------+-------+--------+-------+--------+
|                | USDA  | Post   | USDA  | Post   | USDA  | Post   |
|                | Off   | Es     | Off   | Es     | Off   | Es     |
|                | icial | timate | icial | timate | icial | timate |
|                | \[    | \      | \[    | \      | \[    | \      |
|                | Old\] | [New\] | Old\] | [New\] | Old\] | [New\] |
+----------------+-------+--------+-------+--------+-------+--------+
| Market Year    |       | 0      |       | 0      |       | 0      |
| Begin          |       | 1/2005 |       | 1/2006 |       | 1/2007 |
+----------------+-------+--------+-------+--------+-------+--------+
| Slaughter      | 3910  | 3960   | 4120  | 3810   | 0     | 4000   |
| (Reference)    |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| Beginning      | 0     | 0      | 0     | 0      | 0     | 0      |
| Stocks         |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| Production     | 705   | 685    | 735   | 650    | 0     | 690    |
+----------------+-------+--------+-------+--------+-------+--------+
| Intra EC       | 0     | 0      | 0     | 0      | 0     | 0      |
| Imports        |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| Total Imports  | 10    | 10     | 10    | 10     | 0     | 10     |
+----------------+-------+--------+-------+--------+-------+--------+
| TOTAL Imports  | 10    | 10     | 10    | 10     | 0     | 10     |
+----------------+-------+--------+-------+--------+-------+--------+
| TOTAL SUPPLY   | 715   | 695    | 745   | 660    | 0     | 700    |
+----------------+-------+--------+-------+--------+-------+--------+
| Intra EC       | 0     | 0      | 0     | 0      | 0     | 0      |
| Exports        |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| Total Exports  | 589   | 575    | 625   | 540    | 0     | 580    |
+----------------+-------+--------+-------+--------+-------+--------+
| TOTAL Exports  | 589   | 575    | 625   | 540    | 0     | 580    |
+----------------+-------+--------+-------+--------+-------+--------+
| Human Dom.     | 126   | 120    | 120   | 120    | 0     | 120    |
| Consumption    |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| Other Use,     | 0     | 0      | 0     | 0      | 0     | 0      |
| Losses         |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| TOTAL Dom.     | 126   | 120    | 120   | 120    | 0     | 120    |
| Consumption    |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| Ending Stocks  | 0     | 0      | 0     | 0      | 0     | 0      |
+----------------+-------+--------+-------+--------+-------+--------+
| TOTAL          | 715   | 695    | 745   | 660    | 0     | 700    |
| DISTRIBUTION   |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| Calendar Yr.   | 0     | 0      | 0     | 0      | 0     | 0      |
| Imp. from U.S. |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+
| Calendar Yr.   | 280   | 295    | 300   | 280    | 0     | 295    |
| Exp. to U.S.   |       |        |       |        |       |        |
+----------------+-------+--------+-------+--------+-------+--------+

Source: Statistics New Zealand, Meat and Wool New Zealand, Ministry of
Agriculture and Forestry, FAS/Wellington Estimates.

## TRADE MATRIX -- BEEF EXPORTS

+-------------------+--------+---------+--------+---------+---------+
| ######            |        |         |        |         |         |
| New Zealand Beef  |        |         |        |         |         |
| Exports by Volume |        |         |        |         |         |
+-------------------+--------+---------+--------+---------+---------+
|                   | Ca     |         |        | January |         |
|                   | lendar |         |        | -- July |         |
|                   | Years  |         |        | Years   |         |
+-------------------+--------+---------+--------+---------+---------+
|                   | 2003   | 2004    | 2005   | 2005    | 2006    |
+-------------------+--------+---------+--------+---------+---------+
| United States     | 222113 | 212431  | 203484 | 141314  | 131118  |
+-------------------+--------+---------+--------+---------+---------+
| Korea South       | 27625  | 50951   | 45822  | 32307   | 29953   |
+-------------------+--------+---------+--------+---------+---------+
| Japan             | 20915  | 38146   | 42591  | 30672   | 28558   |
+-------------------+--------+---------+--------+---------+---------+
| Canada            | 41718  | 29494   | 29823  | 25863   | 20175   |
+-------------------+--------+---------+--------+---------+---------+
| Taiwan            | 22221  | 30372   | 29440  | 20123   | 16150   |
+-------------------+--------+---------+--------+---------+---------+
| Indonesia         | 9015   | 12421   | 14177  | 8670    | 13075   |
+-------------------+--------+---------+--------+---------+---------+
| Australia         | 2942   | 5287    | 6819   | 4573    | 3422    |
+-------------------+--------+---------+--------+---------+---------+
| Malaysia          | 6878   | 7738    | 6624   | 5938    | 0       |
+-------------------+--------+---------+--------+---------+---------+
| Mexico            | 6667   | 5794    | 6543   | 5472    | 3061    |
+-------------------+--------+---------+--------+---------+---------+
| French Polynesia  | 5563   | 5812    | 5481   | 3244    | 2765    |
+-------------------+--------+---------+--------+---------+---------+
| Other             | 25771  | 25725   | 21510  | 13185   | 16018   |
+-------------------+--------+---------+--------+---------+---------+
| Total             | 391428 | 424171  | 412314 | 291361  | 264295  |
+-------------------+--------+---------+--------+---------+---------+

Source: Statistics New Zealand, FAS/Wellington estimates.

**SECTION III. SUPPLY AND DEMAND, POLICY AND MARKETING**

## BEEF AND VEAL PRODUCTION AND STOCK NUMBERS

### 2007 Outlook Forecast: Post Forecasts Beef Production to Increase 6 Percent

New Zealand's 2007 cattle slaughter is forecast to increase 6 percent
over 2006 to 690,000 tons[^2]. Beef and veal exports are forecast to
increase 7 percent to 580,000 tons. This follows revised figures for
2006 production levels due to the availability of more up-to-date data.
The increased adult cattle slaughter is a result of increased
availability of bulls for slaughter, as well as an increase in the
number of dairy cows supplied for slaughter. The increased availability
of bulls is due to increased calf retentions for beef production in
2004. The increase in dairy cow supply is based on the forecast that
dairy farmers won't need to retain as many heifers and cows for milk
production in 2007, as they did in 2006 (see below). Calf slaughter is
forecast to remain at a similar level to the estimated slaughter of
2006.

The reliance of New Zealand's beef industry on the dairy industry to
supply animals for beef production continues to grow. Traditionally,
many farmers have farmed sheep and cattle together in New Zealand due to
their complimentary grazing patterns. With the continued expansion of
New Zealand's dairy industry, however, 60 percent of cows and bulls
currently sourced for export beef production originate from the dairy
herd. This is a substantial increase over the 45 percent of beef exports
that originated from the dairy herd in 1990. The overall effect of this
has been that, despite the gradual decrease in beef cattle numbers,
production of beef and veal continue to gradually increase.

### 2006 Revised Estimates: Beef Production Re-estimated Lower

New Zealand's total cattle slaughter for 2006 has been revised (see
NZ6003 for previous figures), with an estimated decline of 5 percent to
650,000 tons. As a result, exports are estimated to decline 6 percent to
540,000 tons. The previous estimates were 705,000 tons for total
production and 595,000 tons for exports. The lower than forecast kill is
due to a number of factors. The dairy cow and heifer cull has been lower
due to increased retentions for milking, as a result of the large number
of dairy cows exported in the first half of 2006 and earlier years, as
well as stock for 85 new dairy farm conversions that will begin
production in spring (and possible expansions of existing ones).

Industry observers perceive that many farmers are holding cattle back
from slaughter as a result of lower prices in the first half of 2006 and
the perception that these prices will strengthen later in the year, if
the New Zealand dollar weakens in value as most analysts predict. Post
estimates that these factors will increase beef production in the second
half of 2006, lifting exports. Between January and July 2006, New
Zealand's beef exports were 9 percent lower than the same time period in
2005, but Post estimates that by the end of 2006 exports will only be 5
percent below 2005 levels.

## POLICY

### New Zealand Reassessing BSE Country Categorization Measure

The New Zealand Food Safety Authority (NZFSA) is currently reassessing
New Zealand's BSE categorization measure[^3]. As part of this, NZFSA
released a discussion document in April 2006, which recommends changes
to the requirements for imported beef products. This is a separate issue
to NZFSA's assessment that the United States safeguards against BSE are
equivalent to those of New Zealand (a final agreement on this issue has
yet to be reached, see NZ6003 for further information). NZFSA states
that the review is in response to experience gained during the BSE
epidemic in cattle, advances in the scientific understanding of BSE and
the associated risk of vCJD, and changes to the World Organization for
Animal Health's standard (which New Zealand's current BSE measure is
based on).

## MARKETING

### Effect on New Zealand of the Re-entry of U.S. Beef into the Japanese Market

New Zealand's beef industry continues to benefit from U.S. and Canadian
difficulties in re-entering Asian markets (see NZ5012 and NZ6003). New
Zealand beef exporters expect minimal disruption from the re-entry of
U.S. beef to the Japanese market, with a small decline in market share
and prices. New Zealand's beef industry predicts a gradual U.S. re-entry
to the market, as U.S. exporters cautiously adapt to more rigorously
monitored Japanese restrictions and the changed attitude of Japanese
consumers to U.S. beef. As such, the re-entry of U.S. product is
expected to have very little impact on export volumes of New Zealand
beef to Japan in the short- to medium-term. As Japan's 2005 beef imports
remained below 2003 levels and New Zealand beef does not directly
compete with U.S. beef, the impact of U.S. re-entry is lessened.

New Zealand exporters will fight to retain the market share they have
gained. They expect that share will gradually be lost to U.S. exporters
in the long-term, but hope to retain some of the gains they have made as
the dynamics of the market are expected to be different to those before
the ban. New Zealand grass-fed beef has different product attributes to
North American grain fed beef. Although traditionally seen by Asian
consumers as a lesser product to grain-fed beef, New Zealand exporters
hope that Asian consumers have developed a taste for their beef during
the absence of North American product. New Zealand promotion will
emphasize that New Zealand beef is natural, free range, disease free and
high in nutrients.

### Collaboration between the U.S. and New Zealand on Sequencing the Bovine Genome

A group of New Zealand organizations, including AgResearch, Dairy
InSight and Agritech Investments, are involved in the bovine genome
sequencing project, which began in 2003. The New Zealand partners
invested U.S. \$1 million into the U.S.-led U.S.\$ 53 million
international collaborative project, which involved organizations in
Australia, Canada and the U.S. Partners in the project announced in
August that the bovine genome sequence is nearing completion, and that
the most current, complete and accurate genome sequence has been
released into the public domain.

### New Brand Developed for New Zealand Beef in Korea

Meat and Wool New Zealand has created a new brand for New Zealand beef
in South Korea. The name translates to 'New Zealand Nature-Bred Beef'
and is accompanied by the slogan, 'A Healthy Gift from Pure New Zealand
Nature.' The aim of the new brand is to appeal to health conscious
Korean consumers by promoting New Zealand beef as natural and grass-fed,
as well as emphasize New Zealand's disease free status.

### Tariff Rates on Beef Imported into New Zealand

These tariff rates remain unchanged from previous years. Australia
enjoys tariff-free entry of all goods into New Zealand under the Closer
Economic Relations trade agreement.

+-------------+----------------------------+------+------------------+
| Tariff      | Product Description        | No   | Preferential     |
| Number      |                            | rmal | Tariff           |
|             |                            | Ta   |                  |
|             |                            | riff |                  |
+-------------+----------------------------+------+------------------+
| 0201        | Meat of bovine animals,    | Free |                  |
|             | fresh or chilled           |      |                  |
+-------------+----------------------------+------+------------------+
| 0202        | Meat of bovine animals,    | Free |                  |
|             | frozen                     |      |                  |
+-------------+----------------------------+------+------------------+
| 021020      | Meat and edible meat offal | 5%   | Canada: Free     |
|             | of bovine animals          |      |                  |
|             |                            |      | Less Developed   |
|             |                            |      | Countries: 4%    |
+-------------+----------------------------+------+------------------+
| 160250      | Other prepared or          | Free |                  |
|             | preserved meat of bovine   |      |                  |
|             | animals                    |      |                  |
+-------------+----------------------------+------+------------------+

[^1]: All tonnages are in carcass weight equivalents (CWE)

[^2]: All tonnages are in carcass weight equivalents (CWE)

[^3]: See
    <http://www.nzfsa.govt.nz/imported-food/bse-categorisation/index.htm>
    for details.