NZ: Surging meat demand opportunity in CHN - analyst

"Sheepmeat and offals appear to provide the greatest opportunities over the next decade," said Wendy Voss of Rabobank, in a report, Feeding the Dragon.

New Zealand beef exports to China would lift as a result of tariff differentials compared to Australian product, though they were likely to remain a minor part of overall export sales.

"But for New Zealand, the Chinese market will continue to play a prominent role in sheepmeat exports," she said.

Voss warned that New Zealand exporters would not only face competition from a range of supplying countries, but also the possibility of changes in Chinese government policy which could make or break markets almost overnight.

"New Zealand also faces volatility in the market, particularly through changes in market access conditions either directly or through competitors changing their access agreements," she said.

Other threats to meat export growth were volume constraints on New Zealand lamb production, producer costs and the threat of improved access from strong competitors such as Brazil and the USA.

Beef and sheepmeat combined make up only 14 percent of Chinese meat consumption, compared to 20 percent for poultry and 65 percent for pork.

Sheepmeat is important in the northern areas influenced by Muslim and Mongolian cultures but less affordable in the cities of eastern China, where the prices of both beef and sheepmeat tend to be up to twice the price of pork and poultry.

Increased wealth, urbanisation, westernisation and population growth boosted total consumption of beef and sheepmeat in China by 2.5 million tonnes and 2 million tonnes, respectively, between 1996 and 2008, but the domestic farm sector also grew rapidly.

China has been an important market for NZ lamb for more than a decade and is the largest buyer of New Zealand wool, tallow, skins, hides and leathers and has been a small, but growing, market for sheepmeat, beef and offal.

"The biggest challenge for New Zealand's producers in continuing this rate of growth will come from supply availability of animals," Voss said.

The Chinese beef market (including Hong Kong) took 10,000 tonnes of New Zealand beef (2.7 percent of total NZ exports) in 2009 compared to the 200,000 tonnes of beef exported to North America.

China/Hong Kong buyers took 42,000 tonnes (11 percent) of NZ sheepmeat exports in 2009, compared to 189,200 tonnes imported by the EU under quota.

Voss said China had 22 percent of the world's population but only 7 percent of its arable land, and the Chinese government estimated 10 percent of that land to be polluted, mainly with heavy metals and chemicals.

"There is little potential for expansion, with the country suffering from severe erosion and desertification in some of its existing productive areas," she said. Water availability was also an issue.