Quick wins important for sector strategy

It’s more than a month now since the release of the meat sector strategy, so I thought it was time to assess if any progress has been made since then. Market prices remain generally buoyant in spite of the exchange rate, our terms of trade are remarkably strong and there is an air of optimism throughout the agricultural sector, especially dairy, wool, red meat and co-products.

But these are the result of global demand and nothing to do with the strategy which will be a long term process of achieving the identified gains which require a complete cultural and structural change in the industry as a whole. Conversations with Mike Petersen of B&LNZ, Tim Ritchie of MIA and Alasdair Macleod of Deloittes show each of the parties involved in development of the strategy is equally committed to ensuring there is urgent action to deliver the benefits.

By the time this column appears, the MIA Council will have met to discuss its next steps, including as a priority who should be on the coordination group, to be headed by the respective Chairmen, Bill Falconer and Mike Petersen.

There is general agreement from all the parties on the need for some quick wins that will demonstrate how well the sector can work together. Two areas identified for immediate action are better extension work to increase the effectiveness of expenditure on R&D and more work on benchmarking performance across the whole sector. Another area requiring continued work is trade agreements to reduce tariffs, particularly into Asia, and market access, such as for beef intoEurope.

Petersen says there has been too little success in lifting performance across the pastoral farming sector, especially when compared with dairy, and this will only occur from a combination of better practical transfer of R&D into farming practice and performance measurement by benchmarking against industry best practice. If we accept that the top 20% of farmers are operating at or near best practice, lifting the performance of the next 30% to the same level is calculated to produce an extra $200 million; and this doesn’t even assume any improvement by the bottom 50%.

According to Petersen, farmer meetings have unanimously demanded a continuation of the benchmarking programme, carried out behind the farm gate by the Economic Service, but despite a 64% higher attendance than last year, probably 50% of farmers aren’t interested in new technology and don’t attend field days. So lifting performance is not just about more effective R&D and extension work or regular benchmarking, but it’s also about getting more farmers to listen and learn how they can adopt best practice and achieve more kg per stock unit and hectare.

B&LNZ is about to put an application for funding under the government’s PGP programme which will be directed towards the main themes in the Sector Strategy of procurement, best practice and in market coordination. This has to be the most effective use of resources, if it can be funded by government, industry and Meat Board reserves, as well as being guided by the major themes of the Sector Strategy.

Deloitte’s sector research programme incorporated confidential benchmarking of exporters’ market pricing which measured each company’s pricing for each individual cut and provided comparison with the industry average. While the Economic Service may not be considered independent enough to collate the market price information, it is important to devise a regular research programme which will be able to provide feedback to the export sector. Hopefully MIA’s coordination group representatives will decide its members have a vested interest in continuing to measure performance against their competitors, so instances of undercutting can disappear over time.

The other main leg of the Strategy, procurement alignment, remains the biggest challenge because it is the only strategy which totally depends on cooperation and trust between farmers and processors. Farmers can choose when, how and which processor to supply, whether to contract, sell through an agent or on the spot market, and if grass permits they can close the gate. Processors choose where to set their schedule and how this compares with a contract price paid to a loyal supplier for guaranteed performance and delivery. There are still too many instances of a contracted supplier being short changed, if the urgent need of next week’s kill takes precedence.

While capacity rationalisation might help in the short term, the prospect of permanent behaviour change is about as good as the Highlanders’ new lime green kit solving any performance problems!

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