Archive for July, 2014

India’s massive buffalo exports reflect different approach to food safety

July 9, 2014

India has exported well over 500,000 tonnes of buffalo to Vietnam in 10 months of the latest July to June year. This figure easily exceeds the total of New Zealand’s beef exports to all countries. (more…)

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Thoughts from the UK

July 8, 2014

While in the UK briefly last week I spent a couple of nights with an old university friend who actually got a First in Agriculture at Cambridge which was the best degree achieved by any of my friends or, not surprisingly, me. He farms near the M4 in Berkshire less than 100 kilometres from London.

 

As usual when I see him, we were chatting about the state of agriculture in our respective countries. He asked me whether I needed a ‘pommie farmer whinge’ to provide some material for a column, so not unnaturally I told him to go ahead. His first complaint was about the amount of New Zealand lamb competing with British lamb in the supermarkets. I suggested the view back home was the natural seasonal fit of New Zealand product didn’t really cut across, but rather complemented, the seasonal availability of British lamb.

 

He partly agreed with me on this, but said the British sheep farmer would still prefer it if the competition from our lamb didn’t exist. I was able to provide some reassurance here by telling him how China had come from nowhere to be the biggest market by volume, if not value, for New Zealand lamb which meant there was progressively less being exported to the UK than was the case even 12 months ago.

 

An aside here which I discovered soon after getting back at the weekend: apparently sales of stockinette are back up to levels last seen in the 1980s when most New Zealand lamb exports were shipped in carcase form. This is clearly a direct consequence of the increase in sales to China, so while we can be pleased with the diversification from our traditional markets, we should be less excited by the return to a product form from the 1980s.

 

As a crop farmer who has a contract with a contractor on a similar profit share basis to our share milking model, my friend is frustrated by the delay in setting the basis for the current season’s EU subsidy. While we may think he’s lucky to be receiving a subsidy at all, as I told him, his frustration is understandable, because until he gets this information, he can’t confirm the profit share with his contractor.

 

Interestingly his calculations indicate that this year’s profits will be higher than last year, in spite of a lower price. This is because the yield this year is so much better than last. After a very wet start to 2014, the weather has been much more favourable and this year’s crop is in much better condition.

 

My friend confirmed the continuing problems being experienced by British dairy farmers who are still losing money on every litre of milk they produce. The supermarkets still dominate the price of milk, while it appears farmers don’t have the ability to supply milk at a higher price for the manufacture of cheese and other value added products.

 

A final impression from my brief visit was the lack of sheep, at least in the parts of England I drove through. In the Cotswolds where I grew up sheep appear to be almost a forgotten species with only the impressive wool churches, built in the middle ages, to serve as a reminder of where the region’s wealth originally came from.

 

But I suspect that has probably been the case for the last thirty years or more. Land use change isn’t restricted to dairy farm conversions in Canterbury and Southland.

Red Meat Profit Partnership tries to answer crucial question

July 3, 2014

Analysis of the objectives and methodology of the RMPP suggests the programme has highlighted the most important issue facing the red meat sector. Briefly stated, it is to work out why there is still such a significant gap between the top farmers and those in the middle of the pack and to lift the average closer to the top performers.

 

When the Red Meat Sector Strategy identified behind the farm gate specifically as a major area of potential improvement, there was much mumbling about why the industry structure wasn’t being more usefully exposed as the area most in need of improvement. But figures released by the B+LNZ Economic Service show this isn’t the case.

 

The most graphic demonstration of this appeared in the RMPP brochure sent out last year. Sheep and beef farmers were grouped in 20% quintiles for comparison and in this table the second to bottom quintile was compared to the top 20%: there was a 3% gap in lamb price achieved, but a staggering difference of 135% between the groups when measured on dollars per lamb and dollars per hectare regardless of the class of farm. To put it simply the top 20% are nearly two and a half times as profitable on a pre tax basis.

 

Obviously the bottom 20% lags even further behind. However this position has improved markedly over the last 20 years with a much greater percentage of farmers moving up the performance scale into a higher quintile. It is tempting to ask how much smaller the national flock would be today, if the level of performance was still stuck at 1991 levels.

 

A great deal of work has already gone into the RMPP, first in preparation for obtaining Primary Growth Partnership funding and second in getting to the stage of signing up the parties to the limited partnership of industry contributors achieved a couple of weeks ago. There is a good cross section of participants including B+LNZ, six meat processors, two banks and Deloitte which have committed to $32.15 million which matches a similar contribution from PGP programme funding.

 

These are not small sums of money which the partners are willing to invest which should hopefully convince sheep and beef farmers that their future prosperity is considered really important. The target is to increase on farm revenue by $880 million and profit by $194 million per year by 2025.

 

The funding programme is designed to be spread over seven years, although Chairman Malcolm Bailey has said he wants to achieve the outcomes faster than that. There are five distinct projects, the first of which – to understand farmer behaviour – is already well under way towards completion before the end of this year.

 

This project is essential for setting a firm platform for the programme as a whole with one set of integrated information. This research seeks to establish across all farming groups barriers to change, what works and doesn’t work in farm extension, and what distinguishes the high performing farmer from the lower performing tiers.

 

The second project focuses on enhancing sector capability, using the banks’ expertise in governance and financial planning, alongside in excess of 80 pilot schemes to be carried out by farm advisors to achieve best practice in breeding, pasture, forage, technical innovation and the development of integrated applied farm systems. An important aspect of this work stream is to attract bright new talent to the meat industry.

 

The third project will concentrate on providing linkage and integration between farm reporting systems which at present are often not properly integrated. This will enable better farm management decision making through benchmarking against regional and national information. Another priority would appear to be teaching sheep and beef farmers the importance of budgeting, because a recent study found that 65% don’t budget, while a further 30% don’t budget effectively which only leaves 5% who do it properly.

 

While the other two projects certainly involve farmers, they also require significant input from other parts of the industry. AsureQuality has the task of ensuring consistency between processors’ QA systems which will make a common set of standards clear to all farmers. This will also enable the achievement of product consistency to meet the expectations of all customers.

 

The final project is one which farmers will no doubt welcome because it is designed to achieve efficiency in the chain linking farmer and processor. Knowing how much unnecessary transport happens at the moment, some of it driven by farmers and some by processors, this area touches on the need for capacity rationalisation which is not the responsibility of the RMPP. Deloitte has accepted responsibility for this piece of work.

 

I am encouraged by the amount of detail and careful planning which underpin this programme because it is of crucial importance to the future of the red meat sector. It demands a great deal of commitment from all the partners, including tax payers, farmers and commercial operators.

 

It won’t happen quickly, but far better to do it properly. Farmers stand to gain a lot from the programme’s successful implementation, but so do the meat companies, banks, all businesses that service or supply the sector, and ultimately New Zealand as a whole.