Reflections on the year that was

2018 is nearly over and it’s now time to reflect on what were the most notable events and issues of the year. It is also time to think about the implications for the future.

NAIT satisfaction with progress suggests complacency

In July last year I raised the problem of accurately identifying and recording all cattle movements, citing the issues experienced by a farmer friend who had no success in reconciling stock on his farm with NAIT’s records. The farmer had contacted NAIT which eventually got back to him, but the process of reconciliation was several weeks out of date.

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Conditions not structures cause of red meat price drop

The pre Christmas surge of optimism, boosted by high beef and sheepmeat prices when export volumes were low, has largely disappeared. The impact of the drought in the lower North and South Islands has seen slaughter numbers increase dramatically at the same time as a series of negative events have reared their head in world markets.

Challenge for A&P Shows to satisfy demands of new public

The 148^th Warkworth A&P Show was held on the Saturday of Auckland Anniversary Weekend on a very warm day with no fear of rain which at least alleviated the committee’s first concern. In the north at least feed is still plentiful, although rain would be welcome, but there is as yet no major worry of drought; so we were able to plan the event and welcome the weather forecast without a guilty conscience.

Livestock numbers forecast shows little change – unlikely to achieve MPI’s optimistic revenue forecasts

The Beef + Lamb New Zealand Economic Service’s latest stock numbers survey shows only minor changes in next season’s predicted volumes. However total sheep numbers are estimated to fall below 30 million for the first time.

Common sense and willingness to compromise would help meat industry

All the predictions of imminent doom for the red meat sector suggest it is a basket case with little hope of redemption. Dairy gets all the favourable headlines and this is fully deserved in the light of its performance since the early years of this century. But it ignores the meat industry’s $8 billion contribution to exports and the substantial farm profitability improvement over the same period, especially taking Beef + Lamb’s improved prediction for this season.

Why red meat sector needs to reform

An analysis of the livestock population over the last 25 years provides compelling evidence of how the ratio of sheep and beef to dairy has changed dramatically. Although we are aware of this change from all the publicity about the growth in dairy farming, it’s a shock to see the bald statistics from B+LNZ’s Economic Service which show a 92% increase in the dairy herd compared with a decline of 47% in the sheep flock and 20% in the beef herd.

MIA gives honest assessment of industry challenges

The Meat Industry Association has recently published its 2013 Annual Report which contains an honest assessment of the challenges of the past year and a summary of the positive initiatives under way.

Drought hammers stock numbers and puts pressure on procurement prices

Last summer’s drought has badly affected breeding numbers and next season’s lamb and beef cattle numbers. The far north’s ewe population was particularly heavily hit, while the breeding cow herd in the Taranaki – Manawatu region was 11% down purely because of the drought.

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?