Comment: MIE seeks funds from B+LNZ

Allan BarberMeat Industry Excellence (MIE) chairman John McCarthy put out a press release on Tuesday pressing Beef + Lamb NZ to put its weight behind the remit to the AGM in March which asks “that Beef + Lamb New Zealand provide funding support to the Meat Industry Excellence Group to secure red meat sector reform.” Allan Barber comments.

This maintains the pressure of a campaign waged by MIE for some months now, but I get the impression the sector reform group is no closer to stating how it intends to achieve the reform it wants. The press release says an estimated $200,000 is needed next year to “meet expenses for travel, meetings and other activities associated with driving the reform process.”

The stated justification is B+LNZ has no mandate beyond the farm gate, whereas MIE has ‘runs on the board’ with the successful election of directors to the boards of Alliance and Silver Fern Farms. MIE’s focus is now on processing and marketing issues in the sector.

Forgive me for being sceptical, but many consultants and bankers have worried about these same issues for many years without finding a solution. So it’s unlikely MIE will be able to solve the problem with meetings, discussions and $200,000.

The main aim appears to be to persuade farmers to support the two co-operatives at the expense of the privately-owned companies which make up over 40 percent of the industry. Unless at least two thirds of farmers voted in favour of the remit, the board of B+LNZ would have a problem agreeing to invest farmers’ levies as MIE asks, as this would clearly be contrary to the wishes of those levy payers who are happy supplying non-cooperative processors.

The press release contains an incorrect assumption as it states the remit would be binding provided it was supported by the lesser of 1,000 signatories or five percent of total registered farmers. However, this only applies to special resolutions for constitutional change. According to retiring chairman of B+LNZ, Mike Petersen, a remit of this nature is not binding on the board, so neither the formula of 1,000 signatories or five percent of voters nor a simple majority would be sufficient to gain the board’s agreement.

Petersen said B+LNZ had supported MIE to the tune of $40,000 last year, because the campaign was successful in engaging farmers in the debate about their industry. But he is now looking for a roadmap describing how MIE intends to get to its desired endpoint.

He expressed some dismay at one of MIE’s goals which appears to be the separation of marketing and processing, because companies such as AFFCO, Greenlea, Universal and Ovation would be totally against losing control of a major part of their business.

This goal would be extremely difficult to achieve, probably impossible unless the government introduces legislation to that effect; and the Prime Minister was absolutely clear at the Red Meat Sector Conference that the industry must come to the government with an agreed position before consideration would be given to legislating.

If the board of B+LNZ is to devote levy funds to supporting MIE’s activities, it will require a significant majority of levy payers voting in favour and the designated use must pass three tests: it must meet the terms of the constitution, comply with the Commodity Levies Act and be fiscally responsible.

Fiscal responsibility is where I see MIE’s case struggling to provide convincing evidence of the logic and achievability of their objectives. McCarthy states in the press release “We are not asking for the moon, nor do we want a gravy train – we just want to reform this sector so that farmers and farming families have a future they can aspire to.”

This is motherhood and apple pie stuff, but it fails to suggest how this future will be brought to fruition. As I have already written several times, I cannot see how farmer ownership of the meat industry is suddenly going to create a paradise where farmers earn more revenue from the market and keep a larger proportion of it.

Other behaviours must change if the industry’s structure is to change for the better: meat companies must be transparent with their suppliers about procurement pricing and how they are prepared to reward loyalty and contracted supply to specification; farmers must make a commitment and deliver on it or provide advance warning of variation.

I give MIE credit for engaging a percentage of farmers in a necessary debate. However it should stop trying to get financial support to enable it to achieve the impossible, instead it should lay out a clear set of realistic goals.

Allan Barber is a meat industry commentator. This item has also appeared at NZ Farmers Weekly. 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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