Comment: Time for government to wake up

Allan Barber

It was a Roman general who first said the best strategy was to make haste slowly and this may now be occurring to John McCarthy, Meat Industry Excellence (MIE)’s chairman, writes meat industry commentator Allan Barber.

It certainly doesn’t look as though there is any likelihood of making fast progress, even if, as he told me this week, there is plenty of support for MIE from farmers and other industry stakeholders.

The organisation’s challenge can best be summarised by looking at the poll on the FW Plus website which asks respondents to say why the proposed industry summit has been scrapped. Twenty nine percent think MIE was wildly optimistic about farmers’ willingness to back words with action, 57 percent think farmers don’t care enough to do anything and 14 percent reckon farmer unity is a lost cause!

MIE’s efforts since April last year have entailed a lot of hard work by a small group of volunteers, starting with farmer meetings in Gore, Christchurch, Feilding and Gisborne to drum up support for meat industry reform. If the poll is remotely accurate, it is a pretty depressing commentary on the state of the red meat sector. The government should be really worried about farmers’ apparent state of disillusionment.

The decision by MIE to call off the industry summit was preferable to ploughing ahead with an event which was guaranteed to fail. It would have a major setback in a campaign which has created plenty of discussion and debate, as well as achieving some successes, without making the progress desired.

MIE’s main success has been to put up three candidates for the boards of Alliance and Silver Fern Farms who were duly elected. Without this achievement, MIE’s campaign would have died. The next positive development was B+LNZ’s agreement after its AGM to allocate $200,000 of levy funds to fund the development of an industry reform programme.

These funds have not yet been paid because MIE must first produce a robust business plan which provides detail on how the strategy will be realised. However I understand MIE is getting close to clearing this hurdle.

McCarthy says the key element of the business plan is an analysis of the size of the opportunity to create increased farmer wealth as a result of cooperation at those points of the value chain over which New Zealand industry participants exert influence. This analysis will be rigorously peer reviewed before it is presented to farmers for their consideration and buy in. After that it’s up to farmers to decide whether they want change or are happy with the present state of their industry.

The challenge identified by MIE is to identify how to grow the size of the pie that suppliers, processors and exporters, and customers have to share. The overseas customers pay what they must to secure supply, but no more; therefore the present industry model dictates that farmers and processors have to share what is left. At current exchange rates this is not sufficient for both parties to make a consistent profit.

I don’t believe MIE alone can solve this problem with or without farmer support. In fact the whole meat industry including producers, processors, bankers, consultants, and industry good organisations has been trying to find a solution for the last 30 years. Unfortunately, all these efforts have failed to come up with an answer that works.

This strongly indicates finding a solution that suits most participants is just not possible. As observed on many occasions the government refuses to get involved unless 80 percent of the industry’s participants present an agreed solution. But that stance is looking increasingly like a cop-out.

Government assistance (or interference) offends apparently sacrosanct commercial principles which the government is perfectly happy to ignore when faced with demands for subsidy by Warner Brothers and Rio Tinto or cries for help from Solid Energy. It begs the question which industry is more important to New Zealand’s prosperity.

If the government is remotely interested in finding a structural solution to the problems of New Zealand’s second largest source of overseas funds, it has to get involved, because it is the only body with the power to bring about a sea change.

It is hard to take seriously the platitudes expressed by Ministry of Primary Industries and the Minister for Primary Industries about the success of the meat industry, when much of the export revenue is as a direct result of the slaughter of capital stock and cull dairy cows. This won’t produce the predicted growth trend line which requires a reinvestment in breeding ewes and cows instead of a continued change of land use to dairy.

The Red Meat Sector Conference takes place in Wellington at the end of July, starting with a panel discussion at Parliament. This seems to me to be the ideal time to apply pressure to MPs of all parties to support a process aimed at finding a solution to what is undoubtedly a multi-faceted problem.

Unless the government wakes up soon, the combined efforts of farmer groups and investment by processors and industry good bodies in Primary Growth Partnership programmes may be a waste of time and money.

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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