Meat Industry Excellence Group’s campaign warms up

Allan BarberThe Meat Industry Excellence Committee (MIEC) organised farmer meeting in Feilding on Friday was attended by about 700 farmers, which one speaker from the floor compared unfavourably with 2,000 at the Drought Shout, writes industry commentator Allan Barber.

However, there is obviously an increasing level of support for substantial change to the meat industry’s operating method which results in volatile market returns.

Alliance and Silver Fern Farms were both represented and the respective chairmen, Owen Poole and Eoin Garden, spoke in support of the group’s aims. Poole told the meeting the industry was working constructively to develop an improved model which was simpler than MIEC’s plan and it was important to ensure the two plans were complementary.

He said the industry’s plan should provide a platform for further reform and a decision on whether to go ahead could be expected within two months. While both co-operatives are willing to turn up to the MIEC meetings and commit their support, ANZCO and AFFCO’s position is not clear, so it will be interesting to see what sort of industry plan emerges from the discussions.

Garden reiterated the determination to reward farmer loyalty, but said 100 percent commitment had to be the bottom line, because commitment was bankable. Companies could be transparent if they had commitment.

This is where I see the real danger to the success of the campaign, because there is nothing to compel either total farmer commitment to their chosen processor or the processor’s absolute transparency on prices paid to suppliers. The obvious risks are that only a proportion of supply will be 100 percent committed, as is the case at present, while meat processors will find themselves seriously disadvantaged if they don’t compete for livestock to fill a shortfall.

The committed farmers may only represent less than half the sheep and beef farmers in the country; after all the meetings will not attract more than a quarter of them at best, so it’s quite possible there is still a majority out there that prefers to play the field. This majority will quite correctly say none of the companies has ever stuck consistently to the principle of rewarding loyal suppliers as opposed to paying higher procurement prices to spot market suppliers or traders.

Mike Petersen, Chairman of Beef & Lamb New Zealand, has picked up on my piece on interest.co.nz in late March which raised the question of Tradable Slaughter Rights (TSR), first recommended in 1985 by Pappas Carter. His April Chairman’s Update has gone unreservedly for this concept as the answer to the industry’s problems because, as he writes, “this proposal delivers meaningful change and – importantly – the behavioural change required to get this industry functioning better for all participants.”

My understanding is that the meat companies involved in discussions about a new industry model have certainly considered the TSR concept, although there will undoubtedly be some variation to the Pappas Carter model. TSRs only address the question of processing capacity, not the issues of market behaviour and seasonal supply commitments, but they would provide both some breathing space for the industry and a platform for a new model to emerge.

In the meantime, livestock numbers would be allowed to find their appropriate level and companies could assess their appetite for continuing as they are or deciding they would like to expand or shrink their business.

The first step is for farmers and companies to develop complementary strategies they can both live with, so that they can learn mutual trust. Only then will they be able to move forward together instead of blaming each other for their problems.

Allan Barber is a meat industry commentator. He has his own blog Barber’s Meaty Issues and can be contacted by emailing him at allan@barberstrategic.co.nz.

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