Superb analysis, now hard work begins

The Red Meat Sector Strategy released at the Beehive last week is an impressive document, producing an objective assessment of the problems and opportunities that face the sector, as well as pointing the ways forward for the next five to fifteen years. At the end of that period, assuming everything has happened as recommended (it won’t or can’t!), the industry will have grown by $3.4 billion or more than 50% by 2025.

With the benefit of a week’s reflection and the chance to hear and read what others – meat company directors, executives, farming leaders, politicians, commentators – think about it, most seem to think it contains nothing revolutionary, exciting or original, although it’s hard to put the finger on what these ‘experts’ think is missing. I spent the best part of a day reading the Strategy from end to end and came to the conclusion it was the best analysis I have read about an intensely competitive and complex industry.

I don’t agree with comments byEoinGardenabout it being identical to the Farm IQ document, although there are strong similarities, and I certainly don’t agree with claims the strategy should have tackled the consolidation issue which was expressly excluded from the original brief. I’m not sure what people expected from the strategy exercise, but clearly there were expectations of silver bullets and magic wands. Unfortunately, the strategy demands focus, hard work, commitment and above all a change in mindset for which the most important ingredient will be industry leadership.

The strategy’s main planks of aligned procurement, in market coordination and sector best practice are the totally logical outcome of an analysis of what isn’t working about the industry at present. The solutions offer flexibility of market engagement models – differentiated product, coordinated commodity and direct to market – which span the present exporter operating methods, but they demand discipline, not currently exhibited, from industry participants. Each major processor has its own strategy for market engagement, but, apart from the New Zealand Lamb Company inNorth America, none involves collaboration or co-opetition, two of the concept words in Deloitte’s document.

The future of the sector is very much a matter of chicken or egg, because one can’t exist without the other, nor can the changes envisioned in the Sector Strategy be achieved. Farmers won’t commit to one processor, unless that processor demonstrates responsibility in procurement and marketing; and processors won’t start to reward farmers for quality supply, unless farmers deliver in accordance with timing and market specifications. To achieve this state of affairs suppliers will have to introduce best practice on farm.

The data in the strategy document suggests the old 80/.20 rule still applies i.e. 80% of farmers think they are in the sector’s top 20%. All the processors I have spoken to recently are emphatic there is a huge gap between the top tier of farmers and the majority that are underperforming. You only have to look at the table in the Strategy to confirm the truth of this.

Yet Sarah von Dadelzen (Farmers Weekly 9 May) still finds it surprising there could be $20 a lamb to gain from adopting best practice across the industry, 10 times more than could be achieved by capacity rationalisation. In contrast I find it surprising people still insist on believing the industry’s problems will be solved by rationalising an increasingly efficient processing sector. It’s time to get real and front up to where the really significant improvements can be made which are, in order of priority, behind the farm gate, procurement and in the market.

But farmers will need help to achieve these improvements. Programmes such as Farm IQ,Alliance’s Farm to Fork and Central Progeny Testing, and ANZCO’s market-led product focus, are all heading in the right direction, incorporating reward for supplying livestock reared to comply with market specifications.

A major concern throughout the Sector Strategy is ‘critical mass.’ At less than 20 million lambs and declining prime beef numbers there’s a danger the processors won’t have enough throughput to guarantee profitability or to satisfy market requirements unless the sector adopts the Strategy’s recommendations. It would be a tragedy if, at a time when global demand looks assured for the foreseeable future, the sector’s critical mass were to drop below an economic level with red meat volumes being insufficient to satisfy market demand or processors’ overhead recovery needs. This would then produce a result not predicted in the Strategy which could seriously undermine or destroy farmer commitment to one processor – bankruptcy not experienced on a large scale since Weddel and Fortex in the 1990s.

This brings me back to the two critically important implications of this document – it will be all about leadership and execution. Without them, this document will have been a $500,000-waste of money, but it deserves a much better fate than that. Let’s get on with making it happen!


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