Posts Tagged ‘B&LNZ’

Red Meat Story about more than brand image

February 22, 2017

There has been a great deal of progress towards the development of the New Zealand Red Meat Story, but most of it has been happening under the radar. That is all about to change. B+LNZ is holding a workshop on 1st and 2nd March at which a wide group of industry participants – farmers, government, processors and exporters – will gather to start formulating the detail of the story, assisted by a strong line-up of guest speakers with international experience in brand development. (more…)

MIE tried hard, but couldn’t make a difference

November 8, 2016

MIE’s decision to disband after three years trying to persuade the red meat sector it was going to hell in a handcart has come as no surprise. But the organisation’s founders and directors are not unnaturally disappointed at their inability to gain support for their plan to solve the endemic problems of the industry. (more…)

Clear vision for red meat sector in sight at last

August 17, 2016

After many years of relatively low levels of expenditure on market development and promotion, the red meat industry faces a major challenge in deciding how best to create the desired image to appeal to the world’s affluent consumers. Currently expenditure is divided between generic promotion, funded by farmer levies, and brand advertising by the meat exporters, with a small amount of joint funding in some of the less mature markets. (more…)

Changing world will suit our red meat sector

June 24, 2016

When sheep and beef farmers are questioning whether they will ever receive the returns they need, there is potentially considerable hope for the future. The changing demographics and spheres of global influence indicate a substantial change in the relative economic power of the markets with which we trade. (more…)

Address to MIRINZ workshop – How and why research is important for the future

March 19, 2016
  1. Themes

 

The three main themes for this workshop are:

 

  1. Added value products focusing on key points of differentiation in NZ meat products with a research emphasis on credible health and nutritional benefits.
  2. Value from quality – research outcomes that will enable the red meat sector to meet increasing demand for high value premium meat products in existing and new markets.
  • Provenance and food assurance – research from fork to farm to ensure that exports are safe, of superior quality with defendable provenance and attractive to consumers.

(more…)

Alliance enforces shareholding commitment to match supply

February 16, 2016

After many years competing for livestock without compelling suppliers to invest in the full number of shares required in principle, Alliance Group has seized the opportunity offered by Silver Fern Farms’ likely shareholding change to review its capital base. (more…)

Surveyor believes in power of cooperative model, but says it’s up to farmers

May 26, 2015

Four months into his new job as CEO of Alliance, David Surveyor is really loving the challenge of heading a global business which is so crucial to farmers, consumers and New Zealand as a whole. He has always been interested in the agrifood space, as he terms it, and enjoys getting to know New Zealand through its agricultural producers. (more…)

Moratorium would solve meat industry’s capacity problem

December 6, 2014

Word has got out suggesting some processors are in favour of a moratorium on new capacity as the only means of sorting out the meat industry’s excess capacity problem. It also appears MIE is initially supportive of the proposal, although it would need to be sure it was in farmers’ best interests before endorsing it completely.

 

My understanding is the moratorium would specifically prevent any new plants or chains operating on beef and sheepmeat around the country. This is where the plan is different from the previously floated concept of tradable slaughter rights (TSR) which proposed to set maximum permitted slaughter volumes for each processor. TSRs were supposed to enable whole plants or even companies to be closed with the costs of closure being financed by the sum paid to the owner.

 

But using slaughter volumes based on a historical average as the determining factor presents two large problems. First there was disagreement between processors on how to calculate individual company slaughter rights and second the scheme would have reduced farm gate competition at farmers’ expense.

 

The proposed moratorium would have several benefits: it would facilitate meat industry reform by providing a starting point for rationalisation, it would protect existing ownership rights, involving a willing buyer and willing seller, and it would preserve farm gate competition. A further benefit of this solution would be to encourage innovation because it quite deliberately puts no restriction on the number of shifts, chain speed or productivity gains on each chain. It would issue a licence for every beef and mutton chain with no new plants or chains permitted during the life of the scheme.

 

So a casual observer might ask what a moratorium would actually achieve, but on closer analysis there is an element of subtlety about such a scheme which would not necessarily produce immediate results. However over time the outcome would be beneficial for the overall efficiency of the industry without the pain of a more radical approach. It is important to recognise the reality that any restructure has a human cost, as chain closures inevitably imply job losses.

 

The government would have to introduce regulation to allow the moratorium to occur in the first place. This gets back to the government’s stated position which is ‘bring us a solution which is supported by the majority of the sector and we will be prepared to intervene.’ The key question therefore is whether or not the moratorium proposal would gain support from the majority, both farmers and processors.

 

If MIE gets behind the concept which I understand it is seriously considering, this would mobilise the farmer side of the equation. It would also be helpful if Beef + Lamb NZ and Federated Farmers also supported it. That leaves the processors who have traditionally found it hard to agree about anything. Therefore it is highly likely the scheme could fail to gain a sufficient level of processor support.

 

This is where MIE’s role will be extremely important, assuming it does a thorough analysis of the concept and decides to throw its full weight behind it. It may then be able to exert influence on the cooperatives through those board members who are sympathetic to MIE’s goals which may be a tipping point in helping to get this scheme adopted.

 

Therefore the most important part of this exercise is to ensure a thorough and robust assessment of the potential benefits and negatives of the introduction of a moratorium. This I suspect is what the government would insist on seeing, before it would take the risk of regulating the meat industry.

 

The proponents of this capacity moratorium appear to have thought through the potential fishhooks associated with the scheme. Chain licenses are site specific and cannot be transferred between sites because it is essential to prevent a new plant or chain opening up where a chain has been closed. It is critical to prevent freeloaders taking advantage of another company’s investment in rationalising capacity. The Commerce Commission would have oversight of the licensing scheme through an annual review similar to the Fonterra milk price regime. Existing foreign ownership of meat companies would be protected, but new investment would be subject to OIO restrictions.

 

I understand the suggestion is the moratorium should last for 12 years, unless an agreed trigger point of capacity reduction were reached sooner than that. This will be a point of contention, but clearly there must be a period of certainty to encourage investment.

 

The experience of the 1990s with Trial Run Holdings is relevant here. This involved the industry contributing jointly to the closure of Weddel’s plants, ensuring the equipment was sold overseas to prevent it being used again in New Zealand,. Rationalisation could equally be achieved by a group of companies funding the closure and disposal of identified excess capacity.

 

But after the Weddel’s closure there was no mechanism in place to prevent the entry of new capacity, either plants or chains. The net result was barely two years of relative peace with enough livestock for all companies, after which the industry descended once again into a state of procurement competition caused by new capacity coming on stream.

 

This is the best plan I have seen for addressing the excess capacity issue, because there is no compulsion and no automatic lessening of competition which could attract the attention of the Commerce Commission. I am hopeful, if not optimistic, this will be the solution MIE will support and could herald a new era for the meat industry.

Changes afoot in red meat sector

November 27, 2014

The much maligned red meat sector may at last be about to undergo a structural change if a majority of processors and farmers can reach agreement on a proposed capacity moratorium. Past history suggests that is a big IF, but a document being circulated among processors, Meat Industry Association (MIA), Beef + Lamb NZ, Federated Farmers and the Meat Industry Excellence (MIE) group contains a realistic basis for agreement on a solution to the capacity problem which has dogged the industry for years. (more…)

Farmers in favour of meat industry restructuring

October 4, 2014

Preliminary results of research conducted by Meat Industry Excellence group (MIE) have shown, not surprisingly, that farmers are strongly in favour of industry reform around a cooperative model. This is the first part of the new industry plan being prepared with the assistance of funds advanced by B+LNZ.

 

The research showed farmers believe overwhelmingly that the cooperative model has the potential to deliver more control of the total value chain and a greater share of revenue back to farmers, while at the same time preserving the industry in New Zealand ownership. Chairman John McCarthy is certain farmers would be willing to invest their own money to help fund a restructure, possibly via a per capita fee on stock processed.

 

The results are based on 491 responses from an initial sample of 800 sheep and beef farmers selected from across the country in geographically representative numbers. While the findings appear to be convincing, it is a comparatively small response base in answer to a set of pretty leading questions.

 

The heads up press release issued late last week claims to have more than 80% farmer backing for industry reform as outlined which should prove to the Minister for Primary Industries that consensus does exist among stakeholders; this being a prerequisite for the government to get involved.

 

Unfortunately agreement from one side of the industry does not constitute a consensus. It’s hard to imagine the near 50% of the processing side of the industry in corporate ownership being in agreement to move towards a greater degree of cooperative ownership. That is without even beginning to convince the coops they would like to combine, although that would be a start.

 

McCarthy offered the tempting notion that minimum savings of $400-450 million would be achievable from restructuring processing and procurement which would of course have to be funded in order to get things happening. That probably doesn’t include the cost of buying out those companies in corporate ownership that don’t necessarily want to exit the industry. I can think of at least four medium to large sized processors which would not be willingly up for grabs except at a very advantageous price.

 

Everybody has a fairly good idea of what needs to happen to reform the meat industry, but how to do it remains the problem. Key things that need to be addressed are capacity rationalisation to cope with reduced livestock numbers and regional land use changes, livestock procurement methods, supply contracts, competition between exporters in the market place and volatility of market returns.

 

I hope MIE’s industry plan, when finalised, can point to a constructive way of solving all these issues, as well as achieving the type of industry ownership farmers say they want. I am sceptical whether the envisaged benefits of greater farmer ownership and control of the value chain will actually be achievable. I am also suspicious of the projected savings from the restructure of processing and procurement.

 

In an ideal world both are possible, but the world is not ideal, especially without a substantial amount of new capital and full bank support. For me the jury is out, at least until I see some compelling financial analysis and, more important, evidence that major players are willing to consider a proposed solution.

 

There is a lot of water yet to pass under this particular bridge.