Middle East taste for lamb keeps farmers in the mint, but how long?

An Iranian mullah roams the slaughter- houses these days, making sure New Zealand lambs are butchered according to Muslim law. The presence of the Muslim holy man highlights a major change in the New Zealand sheep industry: This year the Middle East is expected to replace the United Kingdom as the largest consumer of New Zealand lamb.

Iranians, Iraqis, Saudis, and Jordanians will consume some 148,000 metric tons of lamb, or 37 percent of the 31.5 million lambs sold on the market this year. Britons will consume 37 percent, but are expected to buy 1,000 tons less. Total lamb exports will come to 390,000 tons, worth $833 million ($1 billion in New Zealand).

The shift to Middle East markets came about after the United Kingdom joined the European Community (EC), dramatically cutting New Zealand lamb imports from a high of 210,000 tons to 147,000 tons.

After searching for new markets in Japan and North American without much success in the early 1970s, New Zealand latched on to the oil-rich Middle East four years Ago.

"They were traditional lamb eaters," notes Maurice Jones, assistant general manager of the New Zealand Meat Producers Board, "and suddenly they had a lot more money to import lamb."

In 1981, Mr. Jones estimates, the Iranians will buy 107,000 tons of lamb, up from 64,000 tons in 1980 and 13,111 tons in 1979. Iran has indicated it expects to buy increasing amounts of New Zealand lamb.

Before the lamb can be made into shish kebab, however, it must be halalled, or slaughtered according to Muslim law. This means the lamb must face Mecca, a north- western direction from New Zealand, when it is killed. It also means part of the slaughter- ing process is done by one of 40 Iranian slaughtermen, who intones, "Allah be praised" as the animal is killed.

The Middle Eastern appetite for lamb has created a dilemma for New Zealand. It will fall 30,000 to 40,000 tons short of its EC quota of 245,000 tons. At the same time, lamb producers are aware of the need to develop new markets to lessen dependence on the politically volatile Middle East.

New Zealand also finds Mideast ties difficult because they limit options with allies. The US would like to have New Zealand troops take part in any Middle East peacekeeping force. But opposition from its lamb-buying customers, in part , keeps New Zealand on the sidelines.

Attempts to sell New Zealand lamb in the US have met mixed success. In 1980 exports of lamb from New Zealand to the US declined from 1979, but it expects to boost exports this year by about 10 percent. American lamb raisers have petitioned the US government, claiming New Zealand lamb shipments are subsidized because of the country's export incentives. Jones admits there are export incentives for some cuts (those processed in New Zealand), but says the country must compete with exporters like Argentina, which have more favorable freight rates.

Despite the US lamb producers' petition, New Zealand will not back off the US market. "We believe we have given added visibility to lamb with our advertising ," Jones says.

New Zealand lamb producers also say they try not to disrupt the US lamb market and point out that they sell only frozen lamb there, as opposed to the chilled (fresh) lamb sold by US producers. But the Kiwis do go head to head with the Americans during Easter, the major lamb-eating period in the US.

Not all New Zealanders favor the meat producers policy. Alan Hellaby, president of R. & W. Hellaby Ltd., a large meatpacker based in Auckland, believes New Zealand's biggest mistake was agreeing not to sell chilled lamb on the West Coast of the United States. He also believes the country has been selling its frozen lamb at too low a price. "The consumer sees the low price," he says, "and thinks there is something wrong with it."

Mr. Hellaby's company, like other meatpackers in New Zealand, would like to sell products directly in the US. But eight years ago the New Zealand government gave this exclusive right to the New Zealand Meat Export Development Company to develop the US as a long-term market.

The New Zealand Lamb company says it, too, would like to see higher prices for its product, but points out that its lamb is already priced higher than fresh US lamb.

Even though its farm costs are low, New Zealand has high shipping and packing costs -- caused in part by high wages. Jones admits the industry is hurt by union featherbedding, a problem Hellaby says is "slowly being resolved."