1. Sheep & Beef Sector Where have we been, where are we at now; Possible pathways for the future. 24 April 2013 Ag and Hort Sciences Teachers Conference 2013 Mike Petersen, Chairman Beef + Lamb New Zealand

2. Outline Overview Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Conclusion and Discussion

3. A few years of crisis… 2009 - GFC and liquidity crisis!! 2010 - Liquidity crisis now a solvency crisis 2011 - Solvency crisis now a sovereign debt crisis 2012 - Sovereign debt crisis now a low growth crisis 2013 – Economic recovery???

4. Inflation… Yeah Right 2013… ???

5. Global Trends Economic turmoil in mature markets –Some flow on expected in emerging markets –Emerging market growth so far maintaining momentum and disruption yet to be realised Through all this the key fundamentals remain Availability of safe food continues to be the dominant theme for the foreseeable future

6. Global trends… … the world is a changing place –Volatility will be the norm –Low stocks, high demand and weather extremes fuelling volatility –Food deflation is now being reversed. Food production has to increase 70% by 2050 –NZ can only feed 20 million people –(or 100 million western diets)

10. Outline Overview Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Conclusion and Discussion

11. Beef + Lamb New Zealand –Industry good organisation, farmer-owned –Funded by levies mandated under the Commodity Levies Act (5 yearly referendum, last September 2009) –13 Regional staff – Overseas offices

12. B+LNZ Programmes

13. Outline Overview Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Conclusion and Discussion

14. Main features Pasture based system year round Export focus i.e., sheep 90%+; beef 80% Stabilising flock numbers after a period of decline Unparalleled productivity gains Historical issue of sheep & beef farm profitability and land use change NZ Sheep & Beef Industry

15. NZ Wool Lamb, Beef and Milksolids Nominal Farm price trend, ¢ per kg

16. Export Dominance 2011-12 % ExportedExports $m Wool 91%$776 Lamb*92%$2,670 Mutton*94%$454 Beef and Veal*80%$2,470 Dairy96%$12,478 Deer [$265m] + Other 96% $917 Pastoral Sector$19,765 * Includes co-products June Year Source: Beef + Lamb New Zealand Economic Service, SNZ

17. -27% -3.4m ha +66% +0.9m ha Overall -18% -2.5 m Ha 1990 to 2012 Land Use Trend

18. Pastoral land Area 2012-13e Dairy Farms1.77 million ha Dairy Support0.47 million ha Dairy Total2.23 million ha20% Sheep, Beef, Deer9.05 million ha80% Total pastoral area11.29 million ha100% Source: Beef + Lamb New Zealand Economic Service

19. Farm No’s and Size Source: Beef + Lamb New Zealand Economic Service Livestock Improvement Corporation, Horticulture NZ 1984-85 2011-12e Commercial S&B Farms 22,00012,490 -43% Av Stock Units 3,4244,000 +17% No of Dairy Herds 15,88111,798 -26% Av Cows at peak Commercial Horticulture 144393 7,000 +173%

20. NZ Sheep and Cattle Numbers 1990-91 to 2012-13

21. Productivity Comparison 1990-912012-13e Lambing Percentage (ewe)100.4% 123.3% +23 lambs Hogget lambs as % all lambs-5.4% Average Lamb Wt (kg)14.3518.14+26% Lamb sold (kg/ewe)9.7618.12+86% Wool Prodn (kg/head greasy)5.285.41+3% Average Steer Wt (kg)297309+4% Milksolids per cow (kg)260340+31%

22. NZ Total Production 1990-91 to 2012-13e More Dairy+175% More Beef and Veal+20% Less Lamb-7% but from 46% fewer sheep!

23. Outline Overview Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Conclusion and Discussion

24. NZ Exchange Rate Trend (2000 Jan = 1000) 2012-13f USD +1.9% GBP -0.8% EUR +1.4%

25. Some things never change…

26. Outline Overview Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Conclusion and Discussion

27. 2011 World Beef Exports Chilled & Frozen- December Year

28. NZ Beef & Veal Export Markets (000 Tonnes Shipped, Sep Year) 2011-12 exports to North America 178,875 tonnes (51%) US$980 million

29. Export Beef & Veal Receipts Top 15 Countries, September Year 2011-12 2005-062010-112011-12$ 000$ per tonne USA 871,2125,504 Japan 212,4336,586 South Korea Taiwan137,3956,825 Taiwan South Korea120,6844,442 Canada 105,7195,275 Indonesia 61,1555,175 French PolynesiaSingapore 51,8926,503 Hong KongPhilippinesHong Kong43,6787,603 AustraliaHong KongPhilippines42,3593,809 SingaporeFrench Polynesia 38,3959,533 MexicoNetherlands 32,67315,676 Great Britain (uk) China (peoples Republic)29,1354,592 United Arab EmiratesGermanyGreat Britain (uk)28,7708,921 New CaledoniaItalyMalaysia25,7364,597 Other275,8667,846 2,077,1025,925 Source: Beef + Lamb New Zealand Economic Service

30. Export Beef & Veal Exports 2011-12 Tonnes Shipped, September Year

31. 2011 World Sheepmeat Exports Chilled & Frozen- December Year

32. Export Lamb September year, 000 tonnes shipped weight)

33. Export Lamb Receipts

34. Outline Overview Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Discussion

35. Sheep & Beef Farm Profit before Tax per Farm, Constant 2004-05 $s 2007-08 Lowest in 50 yrs NZ:US$ 77¢ NZ:US$ 43¢

36. Sheep & Beef Farms Farm Profit per ha distribution 1990-91 19,600 Farms, 38% Hill Country 2008-09 12,880 Farms, 48% Hill Country One factor in the distribution change Farms with losses 1990-91 17% 2008-09 23%

37. Sheep and Beef On-farm Inflation Base 2000-01, cumulative trend +47% since 2000-01

38. Pastoral Sector Debt June Year 9 years Sector +153% Dairy +173% +$19.4 b Sheep & Beef +112% +$5.4 b

39. Sheep & Beef Farm Equity total sector

40. Outline Overview Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Conclusion and Discussion

41. Sector strategy – current state

42. Red Meat Sector Strategy

43. Sector strategy framework

44. The common target The structure of the meat industry is questioned. Yes there is work to do and improvements to be made as in any industry… But… The structure of the industry today is the way it is because farmers have built it that way. Farmers and shareholders have to come to a common view if they want to change it. Meat sector rapidly moving to a specialised, diversified, differentiated model

45. On Farm - The size of the prize … Take this $8 billion sector to $14 billion In real terms adding another $3.4 billion … by 2025 or Another $420 (in real terms) per hectare of additional value for the sector!!

46. Farm Profit before Tax per ha

47. Profitability Prize - Sector

48. Benchmarking Long tail implies huge potential for profitability increase Multiple peaks imply mixed sources of variations

49. Outline Global Trends Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Conclusion and Discussion

50. Challenges for the future Market Access and opening up new markets Land use change Acceptance of farm practices and farming in NZ Food safety and traceability - NAIT Water quality and availability / environment Biosecurity Ongoing productivity gains and profitability Consequences of addressing climate change

51. Outline Global Trends Beef + Lamb New Zealand Sheep & beef sector Exchange Rates Sheepmeat and beef export markets Farm profitability Red Meat Sector Strategy Challenges for the future Conclusion and Discussion

52. Conclusion Food is the still the big issue NZ grass fed products perfectly poised to profit from this Considerable change in land use and stock numbers in NZ –Improved long term profits needed for sheep and beef for reinvestment Global focus for lamb and beef –Continuing to diversify into emerging and more valuable markets –…however a real need to continue to service traditional markets Challenges real but so are the opportunities

53. Sheep & Beef Sector Where have we been, where are we at now; Possible pathways for the future. 24 April 2013 Ag and Hort Sciences Teachers Conference 2013 Mike Petersen, Chairman Beef + Lamb New Zealand

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