Southland Regional Council chair, Ali Timms, hopes the government will take on board her warning about the effect of the red meat sector’s continued decline on water quality and increased nitrogen levels, comments Allan Barber.
It’s an understandable message from a regional councillor, given the impact on a region’s land uses and water resources. But it’s no different from the message being promoted by Meat Industry Excellence group and sheep and beef farmers in general, except for the focus on water quality.
Wringing the hands and wishing won’t make a blind bit of difference. Minister for Primary Industries Nathan Guy has repeated his position which reflects exactly what the Prime Minister told the Red Meat Sector Conference last year: if the meat industry as a whole can agree on a restructuring plan, the government will support it. Otherwise it won’t interfere to provide a legislative remedy to a commercial problem, nor should it.
Unfortunately, the meat industry has been hit by a perfect storm which has defeated its best efforts to improve performance to a competitively and commercially acceptable level. The exchange rate sits at an unprecedented high against the currencies of all major trading partners, while dairy returns have shown the same tendency.
Global consumers of dairy products find themselves both compelled and willing to pay the asking price, although there are strong signs the payout could fall by up to 20 percent next season. Beef and sheepmeat are at approximately the same prices they were 13 years ago, when the New Zealand dollar was at about US$ 0.40 (today 0.85) and GBP 0.30 (today 0.52).
If these exchange rates applied today, meat prices would be worth at least 1½ or twice as much as they are; this should be viewed in the context of a global market in which our beef competes with US domestic product and many others besides, while lamb is not a mass market taste and also competes with chicken, pork and other proteins.
The PGP partnership Red Meat Profit Partnership highlights some of the factors which are within the farmers’ control and sets out a set of projects designed to help with their achievement. The most striking points are the performance improvement during the last 20 years and the persistent gap between the top 20 percent of farmers and those in the lower performance brackets.
The comparison shows the small difference between achieved lamb prices – about three percent or $3 per lamb – and the massive discrepancy of 135 percent between groups on the much more important productivity measure of lambs and dollars per hectare.
Therefore, with all due respect to Ali Timms, asking the government to rescue the sheep and beef sector in order to limit the rate of dairy conversions is entirely the wrong approach. The government, in cooperation with regional councils and other agencies responsible for deciding on the acceptable level of pollution in waterways, must set and enforce these standards.
No doubt there will be much debate, not to mention water under the bridge, before this question can be satisfactorily answered. The best possible response would be for the RMPP to lift the profitability of sheep and beef farming to the point where it offers an attractive alternative to dairy. This would be far better than government legislation to solve the wrong problem.