Address to MIRINZ workshop – How and why research is important for the future

1. Themes

 

The three main themes for this workshop are:

 

1. Added value products focusing on key points of differentiation in NZ meat products with a research emphasis on credible health and nutritional benefits.
2. Value from quality – research outcomes that will enable the red meat sector to meet increasing demand for high value premium meat products in existing and new markets.

• Provenance and food assurance – research from fork to farm to ensure that exports are safe, of superior quality with defendable provenance and attractive to consumers.

 

Here is my immediate reaction to these themes.

 

Added value

The meat industry has been talking about added value products for years, but public and farmer perception remains stuck firmly in the belief our meat industry continues to export low or zero added value production. The reality is different (think chilled packaging and improved shelf life, high quality meat cuts for top end restaurants, pharmaceutical products from co-products), but more could be done.

 

Value from quality

Low or volatile commodity prices, exacerbated by exporters competing with each other in the market, continue to support the view that:

 

• NZ doesn’t add enough value to what farmers produce and
• Farmers never see any benefit from industry investment in R&D.

 

Seeking research outcomes that will enable increasing demand for high value products sounds good, but I’m not sure it is realistic. If we think of companies like Sony and Apple, they identify and develop new products that consumers didn’t even know they wanted in the first place. There is an intrinsic contradiction in terms about trying to develop something the consumer wants when they may not realise it is missing from their lives.

 

However available relatively small research funds should ideally be invested in cooperation with the meat industry to ensure support and ultimately uptake.

 

Provenance and food assurance

These are objectives which must be a given for all New Zealand exports. Consumers demand it and therefore their providers – retailers, food manufacturers, food service chains –also demand it. This is why every processing operation is swamped by regulations, compliance documentation and audits.

 

I am not convinced that the term ‘fork to farm’ is anything other than a fashionable marketing phrase, although it aptly summarises the need to produce what consumers want, not what New Zealand producers are able and want to produce. However we certainly know consumers’ expectations of provenance and food assurance.

 

2. Different types of research

Research spans a wide spectrum from blue sky research, normally public sector funded, to specific commercial outcome targeted research which meat companies may be willing to co-fund with matching funding from MBIE or MPI, such as Ovine Automation and the Meat Industry Research and Innovation Fund Partnership. In rare cases where companies see an advantage of going it alone, they may be tempted to fund the research themselves.

 

Unfortunately governments are increasingly reluctant to provide blue sky research funding, as they prefer to be able to measure outcomes. This makes it harder than ever to allocate a budget to research to enable scientists to deviate from a narrow outcome based square. Hence we have the PGP funding model which demands matching funds from industry for a project with a defined commercial outcome.

 

Another critical aspect of the research spectrum is extension work to ensure the research findings are translated into practical reality. B+LNZ and agricultural consultancies have made substantial investment in extension programmes to assist farmers with technology uptake.

 

Our sheep industry provides a stunningly good example of successful science combined with fantastic uptake by farmers. Since 1982 sheep numbers have fallen from 70 million to below 30 million, but increased lambing percentage and lamb weights have largely maintained the total tonnage of exports constant through a combination of fertility, fecundity and survivability. This has occurred in the face of the loss of much of the sheep farming land to dairy and horticulture, not to forget urban sprawl. Sheep farmers have had to get used to having different blocks for breeding and finishing which has also helped productivity.

 

But the latest decline in lamb numbers because of obstinately low market returns will almost certainly mean this stability of export volume will be impossible to sustain, unless either science produces more magic or sheep farming comes back into fashion.

 

The prime beef sector has been basically static or declining for years for much the same reasons as the declining sheep kill, but this decline has been mitigated by demand from the fast food industry and the availability of dairy beef crossbred stock.

 

3. Analysis of the meat industry’s history

We have spent the past 100 years producing nine times as much beef and sheepmeat as we need, so the only solution has been to find somebody overseas to sell it to. In fact arguably the seeds of this problem were sown when the SS Dunedin left Port Chalmers with its frozen lamb shipment in 1882. Ever since then we have got used to producing far more than we can possibly eat and have got used to being the most export dependent economy among first world countries. For the first half of the 20^th century our main status was to be Britain’s off shore farm.

 

This means New Zealand has had to do a number of things over the years to meet the demands of export consumers and what worked last century is no longer remotely satisfactory. The industry has come a very long way, particularly in the last 30 years since the removal of farm subsidies exposed our commodities to the cold winds of international competition.

 

Key developments have occurred in:

 

• Farm management systems and environmental compliance.
• Better genetics leading to better animal breeding.
• Technology transfer and productivity improvements on farm.
• Trade access negotiations and free trade agreements.
• Food safety regulations, including equivalence agreements with major trading partners.
• Animal ID and traceability.
• Diversification of products and markets.
• Improved levels of plant automation (reduction in production costs from ca. 50% of costs to 30%).
• Improved working conditions and industrial relations.
• Plant upgrades and improvements to comply with trading partners’ customs regulations.
• Electronic processing aids such as stunning, immobilisation, accelerated bleeders, back stiffeners and stimulators.
• Electrical stimulation, chilling rates and ageing time for improved eating quality.
• Sophistication of meat packaging and shelf life.

 

But in some ways the meat industry has failed or been unable to afford to move very far at all:

 

• The range of value added production defined as products which add value by further processing towards a discrete finished product or ingredient that can command a genuine premium over and above the product as currently produced and sold. ANZCO Foods has invested more than most or any of the other meat companies, but its range is somewhat underwhelming which is a disappointing summary of the industry’s success in this area. All the marketing hype from Silver Fern Farms and Alliance about their consumer branded product ranges does not provide much evidence of added value, but at least they are trying!
• Progress towards further plant automation has failed to move very far, apart from hide and pelt pulling, better chain speeds and the ovine automation project.
• Industry restructuring has substantially lagged behind the need to rationalise processing capacity in proportion to the decline in sheep numbers. This has resulted in farmer disaffection, procurement competition and a perpetuation of the ‘last man standing’ mentality.
• The dairy industry continues to provide a large proportion of the meat industry’s throughput – without this the meat industry would take a completely different size and form.
• Cooperation between companies is restricted to a very few areas where first mover advantage is not considered cost effectively achievable or beneficial in isolation, such as ovine automation, Johne’s disease research and Meat Industry Research and Innovation fund partnership.
• In spite of the significant increase in sheep productivity, the average sheep and beef farm profitability still lags well behind the performance of the most profitable 20% – ignoring the bottom 50%, the gains from lifting the performance of the 50-80% segment would add hundreds of millions of dollars to GDP, exports and sheep numbers.
• Water storage and irrigation tend to be applied to more profitable land use types than sheep and beef.

 

4. What the world’s consumers want

If New Zealand didn’t produce anything at all or disappeared off the face of the earth, the world wouldn’t really notice it was missing!

 

A few British and European lamb eaters and supermarket chains would be a bit upset until British farmers, cheering loudly, stepped into the gap. European and American dairy farmers have already gone a fair way to making up the dairy shortfall, while China is fast building its dairy herd to become more self-sufficient. Lack of water will prevent this from becoming a reality. In the meantime there would be some regret at the loss of expertise and dairy breeding stock from New Zealand. Other countries, notably in South America, Turkey and Europe, can produce all the fruit and vegetables the world needs, while the world must surely soon get sick of New Zealand Sauvignon Blanc.

 

The biggest cheer of all, apart from a few purist diehards, would come from all those countries that would love to, but can’t, beat New Zealand at rugby, rowing and sailing.

 

In spite of claims the world needs protein to feed an ever increasing world population, there is another school of thought which says there is plenty of capacity to feed the world for years to come. Also it is far from certain many of the world’s consumers will ever become sheepmeat eaters or even meat eaters at all, let alone have the money to pay the sort of price we will need.

 

It is also ironical that our beef industry survives largely on the dietary habits of Americans and fast food eaters from countries that have embraced American food habits. After all the prime beef schedule has been underpinned by the bull schedule for years.

 

We should therefore prepare for a world which does not need our high value protein in large quantities and may not always have an obsession with eating hamburgers. The alternative world is a harsh environment in which New Zealand must make its living from small scale, high quality products which the affluent world’s consumers will pay good money for.

 

This indicates high quality retail and food service meat cuts, meat ingredients for meat dominant ready meals, co-products targeted at nutrition, bioculture, and pharmaceuticals, and wool for high value end uses (e.g. Landcorp Pamu wool to Glerups). Partnerships will also become more important, locally but more importantly with international partners.

 

Although there have been hiccups along the way, the examples of the New Zealand wine, apple and kiwifruit industries provide evidence of the rewards for applying R&D and product development efforts to moving up market. They also provide support for a unified marketing approach, although Zespri has the benefit of having a legislated monopoly status. But all three sectors offer good examples of the beneficial effect of product development supported by brand marketing and promotion. Unfortunately none of the three is especially complex or high tech which suggests that a smaller scale commodity based industry would be easier to drive towards a premium for added value.

 

5. Future research needs for the meat industry

In an ideal world research would be targeted at developing higher value products for an eager global market; these would be products which take advantage of New Zealand’s ability to produce grass for much, but not all, of the year and which provide greater revenue and profits for the locally owned manufacturers.

 

Unfortunately we are not in an ideal world!

 

The holy grail of meat production remains cost-effective on line measurement of meat quality attributes that confer tenderness, juiciness and flavour. At the moment, measurement of carcase yield, fat colour, meat colour and marbling only provide a guide but no guarantees of eating quality.

 

The research outcomes desired by meat processors will be different from those desired by farmers, so the first question is what is the meat industry’s responsibility for satisfying the wishes of its suppliers?

 

The industry’s responsibilities to the farmer are fairly simple:

 

• Cost-effective high quality processing of the farmer’s livestock;
• Marketing to best effect for the best price;
• Payment of a fair price for the quality supplied according to market conditions at the specific time of supply;
• Communication about required specifications and time of supply.

 

If, as appears to be the case, this is not good enough to ensure all producers can afford to stay in business, the whole sector is facing a crisis which research alone cannot solve. As I alluded to earlier, New Zealand’s need to export about 90% of its production to a world with many options places too much burden on the sector to come up with strategies that reward both farmers and processors to the extent they would like.

 

The second question is what the industry should be doing to maximise the value of its production and for whose benefit. Again the answer is quite simple:

 

• Whatever achieves added value over cost of production and delivers a return on the investment to the shareholders.

 

So the third question for you as researchers and meat company technical people is what is your part in all this? Without wanting to teach you to suck eggs, I will try to leave you with some thoughts about where your efforts could be applied, as seen from a layman’s perspective.

 

• There are several Primary Growth Partnership projects conducting research into the red meat sector. My understanding is that research organisations played relatively little part in the early stages of preparing these project applications. Therefore it would make sense for meat companies to engage sooner in the process with research organisations.
• Regular discussions with meat companies to explore jointly beneficial areas of research.
• Leading on from this point, it would be logical for meat companies to have one or more Board members with a product development and scientific background.
• Greater disease pathogen research would assist New Zealand’s food safety record.
• Continued efforts to design meaningful real time measurement of meat quality attributes.
• Ongoing research to design the genetically perfect sheep and prime beef to meet known or potential future requirements.
• More research into high value pharmaceutical and medical uses for co-products as well as greater process efficiencies in saving these products.
• Research into increasing the productive seasonality of sheep and beef (animal genetics, forage and water) as a means of providing a more regular supply pattern into higher paying markets.

 

Unfortunately there are no silver bullets for a commodity trading nation at the bottom of the South Pacific, but it is important to use the skills and attributes we have in the most creative way.

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Tags: Added value red meat products, AFFCO, Alliance, American fast food industry, animal genetics, ANZCO, B&LNZ, chilled lamb, chilled meat packaging, commodities, farm subsidies, first frozen sheepmeat shipment, food assurance, Glerups, Johne's disease, Landcorp, MBIE, MPI, online meat quality measurement, Ovine Automation, Pamu, PGP fund, plant automation, provenance, sheep industry, Silver Fern Farms, SS Dunedin, technology transfer, trade access