Traders are screwing the scrum

As one livestock manager said to me, “nothing has changed except the faces” and even some of those are still the same, except older than they were when I was working in the meat industry.

 In the Red Meat Sector Strategy consultation document, likely to be confirmed when the final strategy is released on 4 may, stock procurement and shortening the supply/value chain were identified as key areas that have to change to enhance profitability. Much was made of the suggestion removing third parties, notably stock agents, from the supply chain would save the farmer large sums of money, although the Deloitte conclusion was not nearly as clear cut as first thought. There’s no doubt a good stock agent can add rather than destroy value, especially where he (almost exclusively male) concentrates on store stock.

But I’m pretty certain the role of traders is less beneficial, because of their capacity to supply large volumes of livestock for which most meat companies are willing to pay a premium. The upside is certainty of supply to fill capacity at one or more plants, but the downsides are numerous: higher procurement price, angry smaller suppliers who may be refused killing space and certainly won’t get the same money, direct supply from saleyards and disgruntled livestock buyers to name four obvious ones. Other more subtle downsides are the effect on farmer and buyer loyalty and the likely lack of livestock to a consistent specification.

Trying to get a straightforward picture of industry practice is almost impossible in an industry where rumour and fiction are rife. My research into this topic met mostly with willingness to talk about it and occasionally with a failure to return my phone call, but nobody I spoke to would admit they bought regularly from traders and certainly not from the saleyards. But it happens, so somebody must be doing it!

There are loud rumours Riverlands are even blowing Warren Robinson away at saleyards in theWaikato, while Greenlea and Universal are also active in the yards and at paddock sales. Alan Brown fromCambridgeis busy buying at Feilding and Rangiuru sales and is believed to be supplying Silver Fern Farms with cattle and lambs on a volume incentive basis, whileAllianceis confidently claimed to be paying all weights and grades in theNorth Island. AFFCO which used to rely heavily on traders like Hugh Green and Robinson now claims to use stock from traders very rarely and then only to ensure sufficient stock for chain start up purposes.

In fact Green now claims he can’t get space from Silver Fern despite being a shareholder, a claim which made Keith Cooper laugh out loud, because he said Hughie always wants an above schedule price to supply at the last minute. Cooper incidentally denied ever doing business with traders because it was totally contrary to company policy.

The trouble with this whole question is deciding where you draw the line between a genuine large volume farmer and an out and out trader. There’s no doubt they can provide a very good service which is worth paying for, especially when livestock is reared on farm or bought store for finishing. For example in the 90s when I was at AFFCO Brownrigg Agriculture supplied large numbers of lambs finished on their winter dry property south of Hastings, but then rumours started to spread about lambs bought at Stortford and trucked directly to the works without even stopping at the farm.

Whether that was true or not, it is absolutely certain a farmer/trader will sometimes have to cut some corners to honour a space commitment. But this is a direct consequence of the meat industry’s fixation with volume to fill capacity instead of an insistence on stock to the correct specification. I am convinced every meat company is guilty at times, some more often than others, of accepting stock which doesn’t come up to scratch, but helps with overhead recovery.

So Deloitte’s original conclusion in the draft Sector Strategy about the need for farmers to align themselves with a processor which meets their business strategy looks spot on. All it would take is for farmers to make a commitment to be loyal provided the processor returns that loyalty.

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