The announcement by Silver Fern Farms of the reopening of its Finegand, Balclutha, casings plant eight years after it closed is an interesting example of history repeating itself. Of particular interest, are the reasons behind resuscitating an operation which nobody would ever have foreseen as likely, writes meat industry commentator Allan Barber.
The first part of the explanation is both simple and inexplicable: simple because China has stopped accepting any shipments of green runners (sheep and lamb intestines) which were processed into sausage casings, inexplicable because nobody seems to know why. The second component of the explanation is belief by SFF that it can amalgamate substantial volumes of green runners from its South Island plants and add value to them profitably in the new facility.
The reason most casings production ceased in New Zealand in the first place was old technology being overtaken by overseas developments. This meant both higher costs of manufacture and poorer quality. The Finegand facility will employ a process which uses half the amount of water used previously.
The good news about this initiative is 40 jobs for South Otago and potentially an improved retention of value for the company and country.
However, it’s worth asking why China has stopped taking consignments of runners from New Zealand and what the impact is of this unexplained development. Nobody seems to know the answer to the first question which is very surprising, considering the value of runner exports is about $160 million annually with a potential loss of at least 40 percent of that figure from an inability to sell to China.
The Ministry for Primary Industries (MPI) has been remarkably uncommunicative on the topic to the extent that more information has been available from casing processors in Europe and China. The concern is that MPI may have sacrificed this small, but significant, market opportunity in order to preserve higher profile exports like red meat and dairy.
There may be a perfectly logical explanation for the ban on New Zealand runners into China, but surely the processors have a right to know what that explanation is. If there is no logical reason, it is the responsibility of MPI to take the issue up with Chinese authorities and let New Zealand manufacturers and processors know what steps are being taken to reinstate access. There are plants which are fully approved and listed for China access, but can’t get clearance to send compliant product there.
The economic impact of this failure to resolve the problem may be greater than the $60 million direct China effect for several reasons. There may not be enough alternative processing capacity globally and in New Zealand to process the available volume; inventory unsold at the end of the season will add to the availability and overvalued stocks will have to be written down; and reinstatement of casing capacity may possibly cost more than is economically justified.
If SFF’s reinstated facility at Finegand can process casings at a competitive cost and to an acceptable quality, this could be a happy outcome for all parties concerned. But it should not obscure what seems to be MPI’s incompetence in failing to lobby for a small (if $160 million revenue is small) but important export market for a meat industry by product.