MARKET SUPPLIER SNAPSHOTSHEEPMEATNew Zealand

New Zealand (NZ) and Australia are the two leading global sheepmeat exporters, accounting for 71% of global trade, but are relatively
minor in terms of global production, at just 8%. When it comes to high quality lamb, NZ is the principal competitor and only exporter who
can match Australia on scale and cost.
• NZ sheepmeat production declined from 2008 to 2011, due toexpansion of the dairy sector, and has since tracked sideways,
limited by a reduced sheep flock.
• In contrast, NZ exports grew significantly from 2011 to 2014 – at
the expense of the domestic market – but are not expected to
grow considerably from current levels.
• This export boom was led by demand growth from China, which
overtook the European Union (EU) as NZ’s top market. NZ
sheepmeat is now heavily reliant on these two markets, with the
EU and China accounting for almost 70% of exports in 2017.

• NZ has relatively unrestricted access to key export markets
and commenced, concurrently with Australia, official free tradenegotiations with the EU in July 2018, where it has an existing
significant quota advantage over Australia.
• NZ, like Australia, will not be able to meet growing global
demand for sheepmeat on its own and will continue to focus onpremium markets. This has been encapsulated in Beef + Lamb
NZ’s recent launch of the Taste Pure Nature brand, which will
be rolled out in coming years.

NZ and Australian
sheepmeat export markets

80
70
60
50
40
30
20
10
0

NZ

19

70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
9
20 8
0
20 0
0
20 2
0
20 4
06
20
0
20 8
10
20
12
20
14
20
16

million head

NZ sheep flock

Source: FAO

China – 39%
EU – 30%
US – 7%
Other – 17%

NZ and Australia sheepmeat exports

500

Australia

NZ

400‘000 tonnes swt

MENA – 7%

Australia

300
200
100
0

2008

2009

2010

2011

2012

2013

Source: Statistics NZ, DAWR

2014

2015

2016

2017

China – 21%
EU – 4%
US – 17%
Other – 31%

MENA – 27%

Source: Statistics NZ, DAWR, shares reflect export volume (2017)© Meat & Livestock Australia, 2018. ABN 39 081 678 364. MLA makes no representations as to the accuracy of any information or advice contained in MLA’s Market supplier snapshot and excludes all
liability, whether in contract, tort (including negligence or breach of statutory duty) or otherwise as a result of reliance by any person on such information or advice. All use of MLA publications, reports andinformation is subject to MLA’s Market Report and Information Terms of Use. Please read our terms of use carefully and ensure you are familiar with its content.

FOR FURTHER INFORMATION VISIT US ONLINE AT:
mla.com.au or email us at: globalindustryinsights@mla.com.au

MLA INDUSTRY INSIGHTSNew ZealandAugust 2018

1

Flock and sheepmeat
production

On-farm comparison:
Australia and NZ

• The NZ flock, like its Australian counterpart, has undergone
significant change over the past three decades. At 27.3
million head in 2017, the NZ sheep flock was half what it wasin 1990. However, sheepmeat production has been lessaffected as the industry transitioned from wool to meat andon-farm productivity boosted output per ewe.
• The NZ sheep flock has come under pressure over the past
decade, competing for limited acres with a growing dairy
industry. Between 2007 and 2014, the dairy herd increased
27% while the sheep flock contracted 23%. In addition, thebeef herd increased (2.8%) for the first time in over a decadein 2017, placing further pressure on the sheep flock, which
contracted again (0.9%).
• New environmental regulation, designed to limit nitrogenleaching from the dairy sector, may also limit expansion of
the beef and sheep industries. Meanwhile, NZ government’s
ambitious target for the country to be carbon neutral by 2050
may see marginal sheep country converted to forestry andsome shift to horticulture and low-emissions crops on moreproductive land.
• The sheep flock should find respite from dairy herd
expansion, which has eased in recent years. However, onfarm productivity gains – notably improvements in lambing
rates and higher carcase weights – will be the primary driverof any production increase.
• In the decade to 2010, annual NZ sheepmeat production
hovered between 500,000 and 600,000 tonnes carcase weight(cwt), but since 2010 has failed to surpass 500,000 tonnes cwt.
Even with productivity gains, it is unlikely sheepmeat production
will be able to exceed 500,000 tonnes cwt per annum over the
next five years due to the reduced breeding base. The exception
to that would be if the flock goes into liquidation and there is a
short-term supply lift.
• Due to the shift from wool to sheepmeat, the quality ofoutput has also increased, with lamb’s share of sheepmeat
production increasing from 68% in 1990 to 79% in 2017.

• NZ lamb production is predominantly pasture based andthe growing season is pronounced. In contrast, Australia has
greater climatic and rainfall variation between regions andthe industry is more disposed to supplementary feeding, due
to greater grain production, as a means of drought mitigationand filling seasonal feed gaps. As a result, NZ has a distinct
supply peak in the first quarter while Australia has a muted
peak in late spring.

NZ sheepmeat production
Dairy herd
expands 27%‘000 tonnes cwt

500
400
300
200
100

Year ending September

LambMuttonSource: Statistics NZ

NZ seasonal peak‘000 tonnes cwt

50

Australia seasonal peak

40
30
20
10
0



Jan Feb Mar Apr May Jun

NZ

Jul Aug Sep Oct Nov Dec

Australia

Source: Statistics NZ, ABS, figures are 10-year monthly average• Reflecting a shift in genetics and enterprise focus, NZ andAustralian lamb carcase weights have increased significantly
over the past three decades. Australian lambs, on average,
have increased from 18kg to 23kg since 1990, while NZ lambcarcase weights have increased from 14kg to 19kg. The more
pronounced feed supply window in NZ and limited out-ofseason supplementary feeding has meant Australia has
maintained a 4kg weight lead since 1990.
• The growth in carcase weights has boosted production even,at times, when slaughter has been in contraction. About
one quarter of NZ and Australian lamb production can be
attributed to carcase weight growth since 1990.
• There is a lower proportion of Merino genetics in the NZ flockcompared to Australia, where producers have maintained
a focus on wool production. Data from agri benchmark
highlights regional and enterprise variation of lambing rates
across Australian enterprise types and in contrast to NZ.
Typical Australian Merino based flocks lag while crossbred
flocks exceed NZ lambing rates.
• Both countries recorded strong improvements in lambing rates
between 2000 and 2017. NZ lambing rates increased from113% to a record 127%, while in Australia the national averageincreased from 82% to 92%. Higher lambing rates havemitigated the impact of a reduced sheep flock on the lamb crop.
• According to agri benchmark data, NZ typically has a costof production advantage over Australia, underpinned bylower labour, feed, replacement animal and machinery costs.
However, meat-focused Australian enterprises have a per kilo
cost of production for sheepmeat that is in line with NZ.
Lambing and cost comparison

What is a lamb?

• Current definition of Australian lamb: meat derived froma female, castrated male or entire male ovine animal thatshows no evidence of eruption of permanent incisor teeth.

• Proposed new definition for Australia and current one

%



20
00
20
0
20 1
02
20
0
20 3
0
20 4
05
20
0
20 6
0
20 7
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17

0

60

for New Zealand: young sheep under 12-months of age or
which do not have any permeant incisor teeth in wear.

Varying industry definitions should be considered whencomparing production and export figures between NZ andAustralia or across time periods where definitions change.



150
140
130
120
110
100
90
80

Lambing %Australia

Merino ewe

Range

Australia

crossbredewe

NZ

US$ / 100 kg live weight

600

Australian and NZ monthly lamb production

380
330
280
230
180
130
80

Average

Source: agri benchmark data from typical farms in 2016

2

MLA INDUSTRY INSIGHTSNew ZealandAugust 2018

Cost of production

Australia

Merino ewe

Australia

crossbredewe

NZ

Exports

Export versus domestic• While NZ is a leader in global lamb production, productivity
gains have not been suffice to arrest the decline in the flock,and sheepmeat production has fallen over the past two
decades. Increasing global demand for premium sheepmeat
has meant NZ export volumes have been maintained, but at theexpense of the domestic market.
• In 2000, annual per capita NZ sheepmeat consumption was
25.5kg, but this fell to 18.6kg in 2007 and 4.5kg in 2017 (OECDFAO 2018 Outlook). In line with most developed consumer
markets, red meat consumption has declined as diets havediversified across meat proteins. However, consumption has
also declined in NZ because of strong demand from export
markets, notably China. Nevertheless, per capita consumption
remains almost three times the global average.
• The domestic consumption share of production has declined
from 21% in 2000 to 5% in 2017. With production capacity
limited and minimal domestic consumption to draw additional
supply from, NZ sheepmeat export volumes are expected toremain steady at best.
• In contrast, Australian lamb production has continued to expand
over the past decade and it still has a considerable domestic
market, which has been resilient over the past five years.

120

25

100

20
0.20

80

15
0.15

60

%

10
0.10

40

5
0.05
2017

2016

2014

2015

2013

2012

2011

2010

2009

2007

Domestic consumption

2008

2006

2004

2005

0

2003

20
2002

tonnes carcase weight quivalant

NZ domestic sheepmeat consumption

0
0.00
0.25

• Australia and NZ sheepmeat exports accounted for 71% of
global trade in 2017. Most remaining sheepmeat trade occurs
between European nations. Particularly with respect to theprime lamb trade, no other supplier has stepped up or has thecapacity to be a major competitor in the global market.
• In recent years, an easing NZ dollar (NZD) has supported
sheepmeat exports and underpinned a shift away fromdomestic markets. Between 2010 and 2015 the NZD averaged
80US¢, but it has since (2015-2017) averaged 70US¢.
• The EU remains the largest recipient of NZ lamb exports,
accounting for 35% of shipments in 2017. However, theexport share of NZ sheepmeat has transitioned over the past
two decades with the emergence of China and declining
sheepmeat consumption in the UK.
• NZ has far greater market access to the EU, but also produces
a lighter lamb carcase and can deliver smaller cuts, more inline with consumer preferences and local product, comparedto Australia. In the US, by contrast, carcase weights favour
Australia’s leading position, as consumers prefer larger-eyedloin cuts.
• NZ and Australia have emerged as the dominant suppliers of
sheepmeat to China, with consumption growth underpinned byrising disposable incomes in China and an inability for domestic
production to keep up with demand.
• With imported sheepmeat largely destined for hotpot and soup
consumption, exports to China are mostly frozen non-prime
cuts and skewed towards mutton. As China emerged, NZ
export markets that previously took low value cuts diminished,notably Papua New Guinea, South Africa, Mexico and, toa lesser extent, some MENA markets. However, China hasoutgrown this pool of secondary cuts, also pulling premium cuts
previously destined for the EU, notably leg.
NZ sheepmeat export transition to China

2000

2007

2017

China – 4%
EU – 53%
Other – 43%

China – 7%
EU – 48%
Other – 45%

China – 39%
EU – 30%
Other – 31%

Domestic share of production (RHS)

Source: OECD-FAO Agricultural Outlook 2018, figures are three year rolling average

NZ sheepmeat exports
3.0

500

2.5
2.0

300

1.5

200

1.0

China

US

Other

17
20

16
20

15
20

14
20

13
20

12
20

MENA

20

20

20

20

EU

Source: Statistics NZ

11

0
10

0

09

0.5
08

100

Value (RHS)

billion US$‘000 tonnes swt

400

Source: Statistics NZ• Supported by growing import demand and favourable trading
conditions, NZ exports to China in 2017 totalled 107,000 tonnes
shipped weight (swt), while mutton exports reached 47,000
tonnes swt.
• NZ has a smaller market share in MENA compared to Australia,
which benefits from a greater portion of product, as well-suitedmutton, shorter sea freight routes (particularly from WA), anda greater number of direct passenger air routes underpin thechilled lamb carcase trade.
• Beef + Lamb NZ has forecast mutton exports to drop 7.3%
in 2018*1, following a decrease in production due to fewer
ewe numbers, while lamb exports are expected to increase
modestly (by 0.7%), with the record national average lambing
percentage offsetting fewer breeding ewes.
* 1 Beef and Lamb NZ forecast on the NZ production year (ending 30 September)

MLA INDUSTRY INSIGHTSNew ZealandAugust 20183• Sheepmeat export value, however, is forecast to rise,
supported by improved in-market prices, tighter international
supply and strong global demand. In light of supply
limitations, growing the value of sheepmeat exports will
increasingly become a focus for the NZ sheep industry as ameans of differentiating itself as a premium supplier.
NZ and Australia two-party sheepmeat share – 2017
100
80

%

60
40

Australia lamb exports
NZ lamb exports

er

US

th
O

EU

EN
A
M

US

th
er
W
or
ld
Ch
in
a

O

EN
A
M

a

ld

Ch

W
or

in

0

EU

20

Australia mutton exports
NZ mutton exports

Source: Statistics NZ, DAWR

Branding and positioning• Beef + Lamb NZ recently launched Taste Pure Nature, a
new marketing campaign leveraging the image of idyllic
pastures in NZ. The strategic focus of the brand is to drive
the consumption of premium NZ red meat in international
markets.
• In-market activation of the brand is expected to be available
to NZ exporters by the end of 2018 and it will initially target
major Chinese and US cities. A proposed levy increase in NZ
is currently under consultation and, subject to approval, theincrease will help accelerate the Taste Pure Nature brand.
• Taste Pure Nature aims to deliver a positive message toincreasingly health-conscious consumers as to the originof food production, leveraging the perceptions of the NZ
landscape. Provenance continues to be an increasingly
important purchasing driver for imported red meat in Asianmarkets• Based on MLA’s 2018 Global Consumer Tracker, Country of
Origin continues to be a key purchase driver for consumers,
particularly in Asian Markets. Beef + Lamb NZ’s Taste Pure
Nature brand will aim to promote New Zealand’s provenancestory in a similar fashion to Australia’s country of origin brand;
True Aussie.
True Aussie and Taste Pure NatureSource: MLA, Beef + Lamb New Zealand

4

MLA INDUSTRY INSIGHTSNew ZealandAugust 2018

Market access• Overall, NZ faces few economic (prohibitive tariffs andrestrictive quotas) or technical (food safety and animal healthrelated) barriers to exporting sheepmeat to major markets
around the world, thanks largely to success in free tradenegotiations and being free from any major animal disease.
• NZ holds a sizeable quota imbalance over Australia in exportingto the EU. NZ can export 228,254 tonnes of sheepmeat
annually tariff-free. In contrast, the Australian quota forsheepmeat stands at 19,186 tonnes*2.
• NZ, like Australia, is also looking to expand benefits, and in its
case defend existing access, from Free Trade Agreement (FTA)
negotiations with the EU, which officially launched in July 2018.
A bilateral FTA with the UK will also be a priority post-Brexit,
given the UK is the largest single European market for NZ
sheepmeat.
• The NZ-China FTA entered into force in October 2008. NZ
was the first developed country to sign a FTA with China andall sheepmeat products exported to China are now tariff free,giving it a modest, but declining, tariff advantage over Australia
until 2023, when Australia’s tariffs will have reduced to zerounder ChATFA.
• NZ does not have a FTA with the US, but faces very limited
barriers for sheepmeat access (tariff of 0.7US¢ per kg forlamb and 2.8US¢ per kg for mutton). NZ faces similar limited
economic barriers to Australia across MENA but, equally, has tomanage a wide array of technical access issues.
* 2 EU sheepmeat quotas are managed on a carcase weight equivalent basis.

EU sheepmeat import quota allocation and utilisation
Australia

NZ
0

50

100

150

‘000 tonnes cwe

ShippedRemaining

Source: European Commission, 2017 figures

200

250

Projections and implications•	
NZ, Australia’s principal competitor in global sheepmeat
markets, is not expected to increase production or its
exportable surplus significantly, if at all. With the domestic
market diminished, any lift in NZ exports will be underpinned
by on-farm productivity gains, specifically through improved
lambing rates and increased carcase weights.

•	
NZ supply has been stretched in recent years with the
emergence of China, and the position of the EU and thedomestic markets have receded. With limited access to the EU,
Australia would be in a position to fill part of the void left by NZ
if the quota were to expand as a result of an EU FTA or, postBrexit, UK FTA.

•	
Australia has a more positive supply outlook but, neither
country, despite being the most efficient and cost-effective
producers in the world, will be able to meet growing global
demand for sheepmeat.

•	The shifting reliance on China could leave NZ exposed toeconomic shocks or swings in China’s domestic sheep flock.
Given the price-sensitive nature of the Chinese market, a
slowdown in economic growth could see demand subside.
Conversely, a recovery in the Chinese sheep flock could also
generate a similar outcome. Any such shocks would result inincreased pressure on markets where Australia has greater
market share, namely the US and Middle East, or result in aresurgence in NZ lamb entering the EU.

•	
As such, the NZ industry has shifted emphasis to growing
export value and providing consumers with a reason to pay,
what have been, record lamb prices in recent years. This has
led to NZ’s development of the Taste Pure Nature brand, which
will see NZ increasingly go head-to head with Australia’s own
True Aussie branding in premium segments of export markets.

2017 exports by volume to major markets
NZ
Partner market

Australia

Lamb

Mutton

Total

Lamb

Mutton

Total

World

307,90286,592

394,494

250,798

146,873

397,670

China

107,318

47,311

154,629

48,20934,98583,195

EU

109,170

8,205

117,375

10,281

5,174

15,454

MENA

24,4182,704

27,12264,05044,935

108,985US22,275

5,514

27,78955,15813,411

68,569

Korea

908

14

992

12,777

1,458

14,235

PNG

829

45

874

10,4701,887

12,356

Malaysia

5,121

8,344

13,465

8,246

14,102

22,348

Japan

7,586

1,014

8,600

8,345

4,475

12,820Other30,277

13,441

43,71833,262

26,44659,708Source: Statistics NZ, DAWR. Unit – tonnes swt

2017 production comparison*
NZ

Australia

Flock size (‘000 head)

27,30072,123National lambing %

127

92

Lamb

MuttonLamb

MuttonProduction (‘000 tonnes carcase weight)

362

94

509

188

Slaughterings (‘000 head)

19,451

3,692

22,431

7,536

Average Carcase Weight (kg)

18.61

25.6

22.7

25

Source: Statistics NZ, ABARES. *NZ Slaughtering, Production & Average Carcase weights are based on annual figures for year-ending September. Lambing rates calculated from lambs marked over ewes mated.

© Meat & Livestock Australia, 2018. ABN 39 081 678 364. MLA makes no representations as to the accuracy of any information or advice contained in MLA’s Market supplier snapshot and excludes all
liability, whether in contract, tort (including negligence or breach of statutory duty) or otherwise as a result of reliance by any person on such information or advice. All use of MLA publications, reports andinformation is subject to MLA’s Market Report and Information Terms of Use. Please read our terms of use carefully and ensure you are familiar with its content.

MLA INDUSTRY INSIGHTSNew ZealandAugust 20185