Comment: Boots on, Red Meat Sector v.2017

Sunset/sunrise? Depends which way you look at it. Photo rgspencer

Happy New Year to you all.  So, what’s been happening while we’ve been away? A quick look at news and views ahead of Red Meat Sector v.2017, while I grab my boots.

Sunset/sunrise

Just before the end of the working year, Dr Rosie Bosworth wrote a thought-provoking Pure Advantage blog post In lament of the NZ Farm suggesting the meat industry was a sunset industry as competing protein production methods emerge. For those of us old enough to remember, this is not the first time the sector has been accused of entering the twilight zone, and it probably won’t be the last. She’s right, we are moving towards Ag 2.0. but I believe consumers will not be won over quite as quickly as imagined to the purely scientific solutions of meat from petri-dishes, 3D printers or alternative protein sources – though changes are undoubtedly ahead.

Steve Carden, Landcorp chief executive spoke at RMSC 2015 about how changing consumer tastes are changing the way we farm. Photo B+LNZ.

Landcorp CEO Steve Carden had the last word on the topic (of 2016), writing a riposte that appeared in stuff.co.nz, presenting four initiatives New Zealand’s largest farmer is using to make sure disruptions work in its favour: ensuring it is using the big leaps in technology to farm better; removing those things from agriculture that make consumers uncomfortable about food; being crystal clear on which groups are being targeted; and exploring ways Landcorp can be part of the disruption, rather than the victim of it.

His conclusion? “So, no. New Zealand agriculture isn’t about to become a figurative ghost town. In fact, quite the opposite. Just like Detroit, a rebirth is happening in our agriculture and the future of food production is at its core. New Zealand already has great farmers – and I think the future we face, if we keep adapting, could make them greater still,” he wrote.

Hear, hear …

Meanwhile, amidst all this change, business goes on for the red meat sector and the latest result shows 2016 was another challenging year, even for the big players.

Silver Fern Farms announces $7.5 million operating loss

New Zealand’s largest meat processor Silver Fern Farms announced its latest annual result on 16 January, reporting a net operating loss before tax and impairment of $7.5 million for the 12 months ending September 2016 on income of $2.2 billion. This has already been well reported and Allan Barber has some comments for us later today.

The result compares to a net operating profit of $30.8 million and income of $2.5 billion the previous year. Operating earnings before interest, tax, depreciation and amortisation (EBITDA) were $32.1 million, down from $90.5 million the previous year.

Rob Hewett.

The result was in line with previous guidance of a small operating loss, said Silver Fern Farms Co-operative chairman Rob Hewett.

“It was nonetheless particularly disappointing and reflected a very challenging year across the industry,”

The company had made good progress in a number of areas, including continuing to grow its value-added business, make further significant progress on improving its health and safety performance and creating a sustainable capital structure for the company.

The $267 million investment from Shanghai Maling was completed after the September year end. Silver Fern Farms Co-operative now owns 50 percent of a strong operating company, in an equal partnership with Shanghai Maling, with the resources to deliver on its value-added strategy and generate sustainable returns over time for all shareholders, said Hewett.

Following the completion of the investment in December and the distribution of $57 million from that process to the SFF Co-operative, shareholders will receive a $34.5 million special dividend on 14 February [more later].

The 2016 annual report will be available ahead of the cooperative’s annual meeting that will take place in Dunedin on 15 February.

The cooperative had earlier announced that the two vacancies on the Silver Fern Farms Co-operative board have been filled by incumbent directors Dan Jex-Blake and Richard Young. As no other nominations were received for the two vacancies, there was no need for an election.

According to Hewett, the continuity offered by pair is important as the cooperative moves into an “exciting new phase”.

“They are both very capable and the board values the significant contribution they each made in their first term as directors.”

Both Jex-Blake and Young are the cooperative’s appointed representatives on the board of Silver Fern Farms Ltd.

Exports

This year, we can look forward to the Government’s review of trade policy, which has been welcomed by industry and very timely given the seismic events in our major markets, the UK and the US, which has literally just seen the inauguration of its 45th President. We’ll be watching to see how it all pans out.

Beef exporters to Indonesia will be welcoming the news that came just before the festive break that New Zealand and the US’ WTO challenge against Indonesian barriers to trade was upheld (more on that later).

The lowering of Korea’s tariffs, an earlier trade access success which closes the gap on New Zealand’s competitors, and the opening of the market in Taiwan is assisting the entry of New Zealand red meats to those markets.

Election year

And, we’re entering an election year here in New Zealand, so it will be interesting to see what positions pop up from which corners and who enters the fray (though we can probably all hazard a guess at that!). Expect a relatively torrid experience…

We’ve rounded up a few of the relevant pieces for you that will flow through this week.

So … boots on and onwards into Red Meat Sector v.2017.

 

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