More than ‘meats’ the eye

Media Release June 20 2011 1

More than ‘meats’ the eye – billion dollar annual boost to NZ agriculture through meat ‘co-products’

Exports of red meat ‘co-products’ – such as edible offals, casings, pelts and rendered products, tallows and meat meal – offer increasingly important market diversity for New Zealand agriculture and in 2010 contributed $1 billion to the country’s sheep and beef sectors, according to a new industry report.

In its recently-released industry note The Fifth Quarter, specialist food and agribusiness bank Rabobank says a focus for New Zealand’s sheep and beef sectors has been on increasing exports of edible offal in particular, using existing plant to process a wider range of edible products. Expansion of sales from edible, but not traditional, parts of the animal carcass has increased the utilisation and returns from meat processing, the report says.

So-called ‘co-products’ are a diverse range of goods created once red meat cuts have been processed from the animal carcass. Adding value to pelts, viscera (offals), bones and fats may be done in New Zealand or raw materials can be sold into a diverse range of markets.

Report author Rabobank animal proteins analyst Rebecca Redmond says pressures on supply in the New Zealand sheepmeat sector in particular (with decreasing stock availability) has been driving processors to extract greater value from the whole carcass. “A similar story has played out for the beef sector, where focus on the expanding range of edible non-meat products has occurred in line with increased interest from emerging markets,” she says.

Increased focus on the ‘fifth quarter’

The report says co-products, commonly referred to as the ‘fifth quarter’, contributed an additional $1 billion to New Zealand’s meat industry revenues in 2010 – literally increasing income by one fifth.

Ms Redmond says processors have increased their focus on extracting product volume and value from the ‘fifth quarter’, regularly evaluating their business models to examine where opportunities lie to maximise revenues and minimise cost.

“As a result the co- products industry has evolved over the past 20 years and is an increasingly important contributor to the industry,” she says. “Added-value rendering volumes have increased, added-value edible offal volumes have increased, while leather and casings have moved to being exported in a semi-processed state.” Overall, the ‘fifth quarter’ maximises carcass utilisation, adding significant value per head for livestock returns, the Rabobank report says.

“As New Zealand’s sheep and beef processing sectors have been feeling the impact of declining flocks and herds for a decade, red meat is now reaching record price levels for lamb and beef, increasing the focus on value from all parts of the carcass to help maintain overall revenues in the face of declining throughput,” Ms Redmond says.

More than ‘meats’ the eye Edible offal sells into markets around the globe and continues to see an increasing demand and global growth, particularly in Asia and developing countries where offal is a staple and used in cultural dishes that are not typical in the western world.

“These markets consume well-recognised products such as heart, liver and kidney to those parts that are less likely to be consumed in New Zealand, such as testes, tendons or tongue,” Ms Redmond says.

The Rabobank report highlights how New Zealand’s disease-free status and adherence to a high level of food safety lends support to the expansion of edible offal markets.

A case for speciality marketing

The report says the contribution made by co-products to the overall profitability of the New Zealand sheep and beef industries is not yet fully appreciated by producers due to the bundled nature of their payments.

“The contribution co-products made to cattle in 2010 was $244 per head, indicating the attractive returns for New Zealand producers in this market,” Ms Redmond says. “Without the revenues generated by co-products, the industry would look very different. Co-products help boost farm-gate prices and add to the overall profitability of the industry.”

“Processors have increased their focus on these products and either moved to align themselves with specialist marketers, in products such as casings, or refocused gaining profitability from materials like pelts, by selling in a semi-processed state,” Ms Redmond says.

Looking ahead, Ms Redmond says the next stage of evolution is whether processors choose to focus more on the specialty revenue source and provide sufficient resources to maximise returns. “The ideal would be dedicated market development and investment for the co-product sector,” she says.

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