Meat companies and union adapt to changing times

The heyday of union representation in the meat industry was more than a quarter of a century ago, but the union still has good coverage across the industry. The decline of stock volumes, closure of the old monolithic single shift plants, shorter seasons and the Employment Contracts Act have all contributed to a massive reduction in the number of meat workers. This has had a dramatic impact on the sheer number of union members employed in the industry, but as a general rule the MWU has good representation across most companies.

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Silver Fern Farms comes crashing back to earth

Chairman Rob Hewett wasn’t joking early last year when he warned that the 2016 result would not be in line with budget. The actual result was a $30.6 million after tax loss compared with a profit of $24.5 in 2015, although a significant part of the latest year’s result was attributable to a $22.4 million non-cash accounting writedown related to the anticipated Shanghai Maling investment. Nevertheless, at a more comparable level the net pre-tax operating profit remained in negative territory, producing a $7.5 million loss against $30.8 million in the previous year.

Past, present and future of the meat industry (Part 2)

Present

Today’s industry has many of the same characteristics as the mid 1980s, but a number of things have changed, mostly for the better.

Turning point for red meat sector

The Shanghai Maling Aquarius offer for 50% of Silver Fern Farms may not be the restructuring catalyst that MIE and some shareholders of both cooperatives were hoping for, but it certainly presages a dramatic change in the industry’s dynamics.

MIE may be sailing into a head wind

The Meat Industry Excellence (MIE) group has appointed businessman and former sheep and beef farmer Ross Hyland to set up an establishment team, as it ramps up its campaign to achieve a restructure of the red meat sector.

 

After a series of meetings round the country at which it gained plenty of farmer support for its campaign, as well as backing from Beef & Lamb NZ and Federated Farmers, MIE has decided that it is now time to inject some muscle and structure into its plans. Chairman Richard Young said last week they had made this decision to ensure that they have an agreed solution and plan ready for the start of next season.

 

This is in spite of the confidential discussions between the four largest meat companies which have not yet reached a conclusion, but next season is only three months away on 1 October. MIE has talked to all the main meat companies and appears to have no desire to pre-empt the outcome of those discussions, but wants to try and make sure things don’t drag on well into next season without any progress.

 

MIE has now reduced its goal of having 80% of the meat industry combined in farmer ownership to a more realistic 60%, although it is still very doubtful how this will be achieved. Another major goal to have all livestock supply on contract to one processor has also been replaced by a commitment to supply stock to specification. The goal of transparency and fair treatment for all suppliers remains a key plank of the programme, while the costs of restructuring are to be shared by all industry stakeholders including the Government, except unions.

 

This is still a very optimistic wish list. It is uncertain just what a farmer owned trading entity with 60% market share would achieve, even if the necessary mergers and acquisitions happened. It leaves 40% of the industry in non farmer hands with almost certainly stronger balance sheets and more capacity for innovation and productivity improvement. My impression is that MIE’s original desire was to sort out the state of the sheep meat sector, but the board has now decided beef must be included, if the plan is to work.

 

With a maximum of 40% of sheep and beef farmers attending the meetings, this still means 60% didn’t attend, although some of those may support the objectives. It also ignores dairy farmers who provide around 40% of the industry’s cattle supply. A dairy farmer’s only thoughts with his cull cows are to get them off the farm as soon as possible and to receive a fair price for them.

 

A former livestock manager’s opinion of cull cows was that it’s the only time dairy farmers can behave like capitalists, because everything else is handled by the cooperative. So it’s hard to see how MIE can expect the meat companies, some of which specialise in grinding beef, to change their procurement methods for this part of their business.

 

I sympathise with MIE’s intentions, as well as the efforts to achieve progress before the start of the season. But realistically there will be no industry restructure in three months. There is currently no indication any of the meat processors are yet in serious financial trouble which reduces the likelihood of a Weddel or Fortex type of event in the near future.

 

Nor can I see the Government wanting to get involved in forcing a restructure of an industry, none of it state owned, which is completely exposed to commercial forces including the value of the New Zealand dollar and international commodity prices.

 

MIE says it will seek any required legislation which I presume could mean trying to enforce any of the following measures: merger of the coops, Silver Fern Farms and Alliance, sale into the farmer owned entity of one or more companies to reach the target market share, mandatory livestock supply contracts to specified meat companies, and a moratorium on any new meat plants or additional shift capacity.

 

What on earth would the Commerce Commission say about all that?

 

 

Meat Workers Union corrected accounts present very different picture

At last, a year after I started my efforts to discover the true state of the Union’s finances, the consolidated accounts have been posted on the Incorporated Societies’ website. In contrast to the original set of accounts which showed the national office as having net assets of less than $1 million, the true picture incorporating all the branches shows net assets of over $5 million.

Meat industry lacks leadership according to Cooke

The National Meat Workers Union’s General Secretary Grahame Cooke stated last Monday the large loss published by Alliance Group would be the first of several for the 2012 year. His point is fairly accurate, confirmed by Silver Fern Farms’ loss announced on Tuesday.

No chance government will legislate to restrict meat capacity

After the announcement last week of Alliance Group’s intention to close sheepmeat processing at its Mataura plant, union representative Gary Davis called for the government to intervene. This was no doubt caused more by frustration over the loss of jobs than any realistic expectation that the government would interfere in a commercial situation.

Alliance to transfer Mataura sheepmeat processing to Lorneville

Alliance Group announced this afternoon its intention to close its sheep and lamb processing operations at its Mataura plant and transfer them to its main Southland lamb plant at Lorneville. Mataura’s beef facility which has recently had a $15 million upgrade will continue to process beef with its remaining staff count of more than 400.

Meat Workers Union must report correct accounts by 12 October

The Registrar of Incorporated Societies, Neville Harris, has given the NZ Meat Workers Union (NZWMU) a deadline of 12 October to provide consolidated accounts for the 2011 financial year. The union has been given more time to provide similar details for the previous five years which cover the period since the national union took over the branches which were previously Incorporated Societies in their own right.