Posts Tagged ‘EU’

British agricultural report sees NZ as model for the future

May 16, 2017

A recently published report entitled The Future is Another Country by British consulting firm, Ferguson Cardo, attempts to describe a positive picture of post Brexit Britain, using the example of New Zealand in the 1980s as proof of what is possible. The authors base their hypothesis on certain key events, including the removal of subsidies, dismantling the producer boards’ funding model and compulsory acquisition rights, and a refocus away from the UK towards Asia. (more…)

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UK farming looks doomed

May 13, 2017

Two contrasting publications have each given a pretty damning picture of the state of farming and food production in pre-Brexit UK; and despite the conclusions of the Ferguson Cardo report into the future of British agriculture, it is hard to see how this situation will change for the better without a huge amount of pain on the way. But equally it is almost impossible to imagine a continuation of the status quo within the EU, where in 2015 70% of UK farm income came from direct and environmental subsidies. (more…)

NZ sheep and beef farmers more profitable than Northern Hemisphere counterparts

January 19, 2017

When sheep and beef farmers in New Zealand grumpily ponder their forecast returns for 2016-17, they may be able to take some comfort from the precarious state of farmers in Europe, particularly the UK where they are facing even more uncertainty of income. (more…)

UK referendum opens can of worms and some opportunities

July 6, 2016

The referendum on EU membership produced a result nobody really expected and nearly half the voters didn’t want, but now everyone has to plan for an uncertain future. There have even been suggestions the exit might not happen, unless the Westminster Parliament passes the required motion to activate the start of the exit process. It’s not worth thinking about the implications for British democracy, if that were to happen. (more…)

Unlikely lower dairy payout will lead to immediate land use change

May 2, 2015

Previous downturns or relative changes in sector profitability have generally led to a change of land use; and because sheep farming was the predominant 20th century rural activity, land use change was usually to a form of farming other than sheep. (more…)

Conditions not structures cause of red meat price drop

February 12, 2015

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. (more…)

Two exciting years in a row

December 20, 2014

2014 and 2015 promise to be two of the most exciting years the red meat industry has seen for a long time and for a change the news is not all bad. There are some clouds around, but also silver linings like better beef and lamb prices, improved profitability and the possibility of positive developments in the industry’s structure.

 

At long last, after a slow start, there are plenty of signs the industry as a whole has recognised the need for change to address the main challenges of inadequate prices, declining sheep and beef numbers and excess capacity which have inexorably brought about land use conversions to more profitable activities.

 

The launch of the Red Meat Sector Strategy three years ago signalled the beginning of the change process which B+LNZ and the meat companies have adopted with support from the government funded Primary Growth Partnership projects. MIE has also gained traction during the past two years, having succeeded in gaining representation on the boards of Silver Fern Farms and Alliance as well as obtaining funding to develop its own industry reform strategy.

 

All these events and programmes have been happening against the background of an improving domestic economy and uneven global economic performance with Asia and North America doing better than Europe where political unrest has hindered the recovery. China has been the success story of the past year for the New Zealand red meat sector, providing an alternative export market for beef and particularly sheepmeat.

 

From the perspective of sector morale, it isn’t doing any harm to see sheep and beef returns outperforming the dairy industry for once. In spite of some retreat from the price peaks in the spring when product volumes were low, it is almost inevitable these returns will be better than the dairy payout during 2015 and quite possibly 2016 as well. The lower New Zealand dollar will be a help too.

 

But for all these encouraging signs, it won’t be all plain sailing for the red meat industry next year. There is already the strong possibility of drought conditions on the East Coast and some other regions, while trading conditions in major markets are uncertain. China has slowed, while many EU countries remain in recession and the Russian economy is in dire straits.

 

Meat processors and exporters all returned to profit during the 2014 year, although procurement prices will have to regain a greater sense of reality than has been the case in recent weeks, if 2015 is to allow a repeat performance. While lamb slaughter volumes are forecast to be about 20 million, not as low as 2011-12, but fewer than last season, the low milk payout will mean plenty of cull cows to process. If the US price holds up, the beef processors should be able to make hay to offset excessive lamb procurement costs.

 

Intriguingly both Silver Fern Farms and Alliance begin the year with new Chief Executives who will oversee some significant industry developments which will undoubtedly affect the companies they manage.

 

There are at least three big questions for the red meat sector in 2015:

  1. What will be the findings of MIE’s meat sector reform paper when it is published in February;
  2. Will farmers be prepared or financially able to invest further in ownership of the value chain; and
  3. What will be the outcome of Goldman Sachs’ investment recommendations to SFF’s board?

 

My suspicion is the key to the future shape and structure of the sector lies in strategic developments in the country’s largest red meat processor and exporter. The announcement has already been made about dividing SFF into product based business units which provides the opportunity to sell them individually, quite possibly to an overseas investor.

 

CEO Dean Hamilton has been very open about the company’s need for $100 million capital to reduce debt and allow further investment in its value added business. He also admitted in last week’s Farmers Weekly it was unlikely farmers would be able to stump up much of this capital in spite of a supportive response from supplier meetings. Five years ago the company succeeded in obtaining $22 million from suppliers invested in $1 shares which are now worth 40 cents, so there isn’t much chance of getting nearly five times the investment from existing shareholders, many of whom will already have lost 60% of their initial investment.

 

Unless Alliance or another local investor is willing to buy all or part of the SFF business which is unlikely, the alternative options appear inevitably to be from overseas. An external entrant to the sector would not welcome any constraints on its right to expand capacity. This would effectively derail any industry reform involving farmer investment in owning the value chain that MIE may envisage or that might be agreed as a result of the moratorium proposal.

 

Therefore 2015 will be exciting for participants and fascinating for observers with a strong probability we will all be much clearer about the future by this time next year.

Meat trade unrecognisable from 40 years ago

November 21, 2014

It is sometimes tempting to think nothing much has changed with meat exports in recent years when you read all the publicity about the problems in the meat industry. Since the beginning of this century the contrast with the dairy industry has been particularly marked, but suddenly this season the positions have been reversed. Sheep and beef farmers can hold their heads high again and it seems likely this state of affairs may even persist for longer than just this season. (more…)

Trade deals coming thick and fast

December 5, 2013

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The TPP may not be happening as soon as expected, but free trade agreements with individual markets, Chinese Taipei and Peru, will come into effect, some aspects immediately, and provide more immediate rewards for our exporters. (more…)

Lipstick doesn’t hide the ugly truth

November 18, 2013

Silver Fern Farms released its annual loss accompanied by a press release which attempted to put some gloss on what was in reality an awful result. It was an improvement on the year before, a matter of some pride on the teleconference this morning, but a $36.5 million loss was only $5.8 million less than the previous year. (more…)