The growth part of China's sheep industry
I’m writing this column on my flight to Qingdao in China – after participating in a sheep and beef roadshow in Urumqi.
The roadshow was organised by New Zealand Trade and Enterprise – with the purpose of exploring agri-tech opportunities for companies in China.
Now you would probably ask me: why would we (New Zealand) want to help China grow their sheep and beef industries when they could potentially threaten ours?
My blunt answer: they will do this with or without us anyway. China’s hunger for knowledge, as well as their ability to industrialise farming and innovate will well ensure the ability to significantly increase their own sheep meat and beef quantities in the future.
Well generally speaking, China's sheep industry is like where their dairy industry was 5 to 10 years ago – "primed to go, with significant investment starting".
Let me illustrate this with examples of two companies I visited here in China.
One of them has farms and plants throughout Inner Mongolia and is investing heavily in developing a fully integrated supply chain.
This means the company owns all parts of the supply chain – from farm to chopstick – including their own cold chain facilities, retail, and online assets.
This is not something new in China and is a trend that has developed from the need to manage food safety.
The confidence from knowing that forage prepared for the livestock is unadulterated, through to controlling how meat is presented in the market place is critical for long-term success.
The company, which is only three years old, has a highly capable management team, led by well-educated businesspeople who have already built a considerably-sized publicly listed company in the forestry sector.
These people own farms, which are feedlots, cut, and carry forage and silage systems. They assist with the development and management of local farmer co-operative feedlots, where increasingly they provide rams (from their own breeding programmes) and feed in exchange for lambs.
All these are well supported by the Chinese government at local and national levels. Apparently, this company also has future plans of eye-watering scale – intending to list on the China stock exchange in the next two years!
The other company is similarly savvy, with a wonderful record of business success.
This company belongs to a group of companies, one of which has captured 13% of the global market with its car-wheel part production!
Situated in the Xinjiang Autonomous region in West China, this company thrives on the cultural demand for lamb. This is given that the region is bordered by the ‘Stans’, India and Russia – with a significant Islamic population.
Similarly with the first company, this lamb company is also three years old but already has 40,000 ewes.
The ewes – local Hu and Han breeds – lamb three times in two years and are highly fertile; producing two to three lambs per ewe for each lambing.
The company’s genetic challenge is to maintain fertility while improving meat yield and lamb growth rates.
Having said that, they too, plan on developing a fully integrated supply chain, but not before they have expanded their sheep numbers to 200,000 in two years!
There is nothing like getting out of your own country, to open your mind and contemplate the position of your home patch. What might this mean for New Zealand’s sheep industry?
What New Zealand is really good at are animal husbandry, forage management, quality processing, and capitalising on increasing land prices.
What we are not so good at – on the other hand – is industrial-style thinking, co-operating as unified businesses, and creating value for our products in the market.
Commodity price volatility will continue and at times, be drastic, just as we are recently experiencing with the dairy sector.
To compete with the increasing production from China, we need to develop high-end routes for our products in China and other markets.
More importantly, we need to ‘work’ our business partnerships with China to ensure supply security. As always, it is important to work on our own businesses, making them better and more efficient, but we must not forget to scan the horizon and be positioned for change.
Should the New Zealand sheep industry be concerned? Yes, probably, but let’s use that as the impetus for strategic action.