Elementary thoughts about improving the meat industry

So much time and effort has been applied over the years to fixing the woes of the meat industry, it would be easy to conclude it’s difficult, even verging on impossible, to fix. In fact to listen to all the talk it should be dead and buried by now. But against all the odds the meat industry remains our second biggest export sector with nearly $8 billion annual sales compared with dairy’s $10 billion.

This year’s prices are better than they have been for years, although they haven’t often been as good as this which is the main problem. Other problems are overcapacity and the level of suspicion between the parties about procurement and how much of the revenue should come back to producers compared with what is earned by the export customer.

Both meat companies and producers must share the blame for suspicion about each other’s motives and performance. It’s a classic case of both talking past each other and not listening properly with the inevitable end result, while there is so much rumour and hearsay which distorts the relationship between the two. Nevertheless I think there are some pretty simple principles to follow which would improve farmers’ relationship with meat companies, their performance and consequently their impression of the industry.

There is a lot of talk about the cost to the farmer and industry as a whole of overcapacity, with some commentators seeing fundamental changes to the selling, processing and procurement structure as the best way to solve the inefficiencies. There are many suggestions ranging from single desk selling to company mergers to consumer led breeding and marketing. Unfortunately none of these will solve the industry’s performance problem, especially not in the short term.

Single desk selling has already been tried and failed and there is no mandate for legislation to enforce it, since the processing sector is entirely in private ownership. Equally, company merger and rationalisation can only occur between two willing parties, unless one company goes into receivership precipitating a fire sale. In spite of the apparent logic of a merger of the two farmer owned cooperatives in the south, the two companies are like chalk and cheese from the perspectives of business configuration, management and business philosophy. Therefore it won’t happen, unless both sets of shareholders elect boards which see the logic as compelling and put the past behind them.

Finding the right balance between capacity and stock numbers will arise from more efficient capacity replacing the less efficient, whether because of age, plant configuration, staff numbers, industrial relations, product specifications or marketing ability. Ultimately every processor survives or falls on its ability to compete for livestock, dictated by its debt levels, cost structures and marketing ability.

One simple way to improve industry performance and at the same time reduce suspicion between producer and processor is for the companies to stop buying from traders and in the sale yards. Nothing is more certain to destroy trust than the sight of meat company buyers and traders competing with farmers in the yards for livestock which will be loaded onto the truck for transport directly to the works. Right now I am reliably informed this is happening every week at Frankton and Tuakau sales and almost certainly at other sales throughout the country which makes nonsense of calls for stress free livestock bred and reared to meet the consumer’s demands for quality. An alternative solution is for farmers to boycott processors they know to be buying from traders or in the yards.

If processors were prepared to withdraw from the yards, there would be better opportunity for farmers to choose a processor they trust to handle all their livestock, confident their animals wouldn’t be downgraded by being combined with sub-standard livestock.

Looking behind the farm gate, farmers owe it to themselves to be as good as they can be at their job. They should examine their farm practice for ways to improve performance, because it is a fact there are sheep and beef farmers performing very profitably in the current environment. There are many examples of innovation evident in the farming sector which can provide pointers to the farmer who is willing to learn from his or her peers. For instance, regardless of what Federated Farmers say, there are significant advantages from animal traceability for cattle and sheep which must follow sooner or later because the market will demand it across all species.

In the recent Red Meat Strategy consultation document one of the conclusions was particularly relevant and contains a simple truth: establish a detailed business plan – stick to the plan and monitor your business to inform your decisions. In other words focus on managing your business and measure your performance. It’s a long-established business truth and it works!

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2 Responses to “Elementary thoughts about improving the meat industry”

  1. Allan Barber Says:

    hi allan,

    i like reading your articles but was annoyed at one of your latest saying “regardless of what fed farmers say, there are significant adv’s from animal traceability for cattle and sheep”.

    yes there are considerable adv’s of “traceability”, but can you please explain to me how the electronic system about to be forced on us improves traceability over the current manual one. ie- currently the freezing works reads (electronically) the manual bar code when cattle killed anyway… so no improvement to point of slaughter. Post slaughter, old or new system, you lose traceability of cuts… the only way to retain that is electronic coding of individual cuts which i think the technology is available for but another issue altogether.

    i farm in southland and are miffed at reading all these articles talking about all these advantages which the article then doesnt go on to explain in detail.

    maybe you can refer me to a good article or 2 that does xplain the improvement to traceability.

    regards
    jules

  2. Allan Barber Says:

    Hi Jules

    I don’t know of anybody else’s articles you can read, but I have attached three of mine from 2008 and 2010 – I don’t think the first one actually appeared in Farmers Weekly, but it probably best expresses my view of the advantages of the scheme. You will see an analysis of Federated Farmers’ position and reasons for it in each article and I thing I have been fair and factual. I have been consistently in favour of traceability since the beginning and I think these articles will give you my reasons which I hope will satisfy you.

    Thanks for your email

    Regards

    Allan

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