Forecast for agriculture

Therefore, changes in global consumer preferences and diets can be significant for New Zealand farmers. A growing consumer preference that has attracted a significant amount of attention in recent years is a shift away from natural sources of protein to artificial sources.

In recent years the prospect of artificial meat or meat substitutes have gained consumer attention. A ‘meat substitute' refers to a product that may be used to replace meat as a key protein in a meal.

‘Artificial meat' is a product has been artificially created to replicate the taste, texture or other sensation, of eating meat. A number of meat substitutes have become available to consumers in recent years, including soy and tofu based products and a growing range of artificial meats. The artificial meats currently available are generally synthetic products created using protein from plant materials, such as pea protein.

One recent example of the potential market disruption is Air New Zealand offering the ‘Impossible burger”, a burger made with synthetic meat, on flights between Los Angeles and Auckland.

Other products on the horizon include lab grown meat such as that being developed by Memphis Meat. Lab grown meats are genuine meat products grown from animal cells (without growing a full animal). These meats are generally not consumption ready at this stage..

While it may be a number of years before alternative meats are directly competing for the average consumer the market is already shifting at the margins. Research by Roy Morgan shows that the number of New Zealanders “who agree 'The food I eat is all, or almost all, vegetarian'” has increased 2% points in the four years between 2011 and 2015. It is likely that this trend will continue.

This shift is even more prevalent in other countries. In Germany, 44% of people now reported eating a ‘low meat diet' in 2017, up from 26% in 2014. While in the US 6% of people now report to be vegan, up from 1% in 2014.

Overall, a fall in meat consumption per capita is still not observed in the data, rather households in developed countries appear to be switching away from beef and towards poultry as the main source of meat.

Meanwhile, meat consumption in developing countries continues to lift, as incomes rise. The increase in consumption has been concentrated in poultry for developing countries, though beef consumption increased to a lesser extent. For example, between 2010 and 2015, Chinese per capita poultry consumption increased by 7%.

Overall, it is unlikely that the potential impact to New Zealand's meat industry will cause significant disruption within the Treasury's forecast period (the next five years). The OECD forecasts meat consumption per capita to remain roughly constant in developed economies such as the European Union and in the US, over the next ten years. Meat consumption per capita in developing economies is forecast to increase as household incomes rise eg, beef consumption per capita in China is forecast to increase by 10% between 2017 and 2022. However, towards the end of the forecast period and for some time after it is certainly a risk that the meat industry in New Zealand will face and increasing pressure from artificial meat products.

One important factor will be the cost of these alternatives. For example, the cost of Memphis meats lab grown meat has declined from an initial cost of around $325,000 for a burger patty in 2013 to around $11.36 per patty currently. Once cost is no longer a prohibiting factor, commercial availability will likely be the key issue. White Castle, a large fast food chain in the USA is currently selling the 'Impossible Burger' at around a third of its USA locations.

Beef and Lamb New Zealand produced a report looking at the future for meat and potential for changes in consumer preferences. They suggest four possible scenarios:

• In this scenario red meat has fallen out of favour and is only used in niche circumstances (eg, for consumption by infants or in medical application)

• Red meat becomes a luxury good and is rarely consumed as alternative proteins are cheaper

• While consumers have largely turned away from red meat, for environmental and ethical reasons, it is still necessary for most consumers due to a lack of other affordable options.

• Red meat is widely consumed and remains a staple of most consumers’ diets.

In the first three scenarios the market for red meat is fixed or falling. The report poses different responses for the red meat industry depending on which scenario occurs.

While, artificial meats may not be in a position to significantly disrupt the market at present, they do pose a risk. This risk is not sufficiently certain in timing or magnitude to meaningfully incorporate into the Treasury's economic forecasts at this stage. However, it is a risk that the Treasury will continue to monitor.