Comment: Better times in prospect for red meat

Allan BarberThe ANZ Red Meat Sector Key Insights Report, released earlier this week, highlights some encouraging signs for the beleaguered beef and sheep farmer. According to the findings of the report 65 percent of red meat farmers surveyed plan to increase production in the next three to five years, with 69 percent planning to invest in animal genetics and more than half seeing benefit from obtaining expert help to improve farm productivity, notes Allan Barber.

The report stated that while structural issues within the industry remain unresolved, many farmers have an expectation that solutions are emerging that will lead to better integrated supply chains. The immediate response of the Meat Industry Excellence Group’s chairman, John McCarthy, was that farmers shouldn’t be complacent just because prices looked better at present. He emphasised the long term problems remain unresolved.

Of course this is a debate between the ‘cup half full’ and ‘cup half empty’ schools of thought and both make valid points. It is really encouraging to see sheep and beef farmers intending to reinvest in their farm enterprises, but I also see McCarthy’s viewpoint which is along the lines of ‘one swallow doesn’t make a summer.’

However as a matter of interest I received an email from a South Island sheep farmer recently which painted a very positive picture of the lot of red meat farmers. Without blowing his cover by identifying him, I believe his comments are inspirational and well worth repeating.

“I just wanted to convey to you our year’s results without the help of FARM IQ, or much technology, but enough for a 60 year old not to not get lost with: 500Ha, 6,000 ewes plus 1,500 hoggets, 7,500 SU, sold 6,200 lambs 19.5 kg average weight @ $105 and kept 1,500 replacements.

“This worked out at income $120/SU, farm working expenses $60/SU, debt servicing (including principal repayment $40/SU) leaving $20/SU for the boss and me to pay tax and take drawings. We curtailed the development and surprised ourselves by getting farm working expenses down to half the income.

“I didn’t want to appear to be blowing our trumpet but in an average type of year we got a fair result to reinforce why we are such committed and satisfied sheep farmers. It is a return of 13-14 percent on the capital we have invested in the business over 30 years, and all done by ourselves with the kids helping in holidays.

“There must be hundreds of cockies toiling away, as happy as we are, keeping their heads down and grateful to own a sheep farm to raise kids, educate and see them make their way successfully in their professional careers.

“Disillusioned? Dysfunctional? Not around here!”

My contact also assures me that he has a great relationship with his processor. With that sort of attitude, you would think the rest of the red meat sector ought to be rolling along without major problems other than the need to keep on using common sense, working hard and managing the cashflow.

On the negative side of the picture, those red meat farmers who have substituted dairy grazing for finishing lambs may find the need for their services less in demand from dairy farmers faced with a payout possibly less than $6 a kilo of milk solids. The cost and availability of replacement ewes may be beyond their financial resources having got rid of their capital stock.

But the optimistic view provided by the ANZ report and the story from my South Island correspondent give me hope that things may genuinely be improving.

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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