Explore fresh commercial proposals for red meat sector, KPMG urges

KPMG NZ Agribusiness Agenda 2014Many farmers have lost confidence in the red meat sector and industry needs to explore fresh commercial proposals that could deliver improved value to stakeholders, a new report from KPMG suggests.

The consultancy’s annual Agribusiness Agenda survey talked to 157 agribusiness industry leaders in 13 Roundtable discussions around the country.

Volume 1 of this year’s Agribusiness Agenda report notes that the last year has not seen the radical reform of the red meat sector that many commentators have been calling for.

Awareness of the sector’s opportunities and challenges has increased, but so has the movement of land use away from the meat industry towards dairy, and dairy support, says the report.

The authors say the issue facing the red meat sector was summarised in a “single eloquent comment” from one of the leaders. “The dairy boom is impacting the sheep and beef sector in ways that could never have been envisaged, but most significantly it is destroying farmers self-esteem.”

Rebuilding belief involves a shift in culture that needs to be driven by all in the industry and the report noted that some progress is being made to that end, with initiatives like FarmIQ and the Red Meat Profit Partnership being identified as important steps in the right direction.

It is acknowledged that the industry situation is not uniform and that many farmers and processors are delivering excellent results from their businesses. Greenlea Premier Meats is profiled in the report as “an innovative family-owned company that is successfully growing export markets for premium beef products.”

The concept of a ‘red meat Fonterra’ met with little support during discussions but most leaders recognised that industry needs to continue to evolve.

If sector participants are willing to take a long-term perspective, to move beyond survival mode and focus on maximising potential, some potential options proposed by KPMG could include:

  • An open access toll processing entity
  • International partners being attracted to invest in the sector
  • More tailored focus and branding to grow value in each sector, as sheep and beef products have totally different characteristics and niche markets.
  • The “parlous” state of the wool sector is seen as a key challenge to the financial viability of sheep farmers.

The continued success of New Zealand’s primary industry is dependent on having strong and viable beef and sheep farming sectors. Strong leadership was again mentioned as being critical for the sector to establish a new era of engagement, collaboration and trust-based relationships.

Other key findings and recommendations contained within the report are:

  • Maintaining world-class biosecurity was ranked as the number one priority by industry leaders, for the fourth consecutive year, followed by food safety as the next most critical issue.
  • Securing market access for New Zealand products via high-quality trade agreements became an increasingly important issue for leaders in 2014.
  • New Zealand should aspire to become ‘Asia’s delicatessen’ delivering a wide variety of premium products, including new products that are developed and targeted at niche Asian markets.
  • New Zealand’s foreign investment regime is not sufficiently stable. Policy should be designed to attract foreign investors who are willing to work constructively with New Zealand companies.

The KPMG Agribusiness Agenda 2014: Volume 1 – Facilitating Growth in An Uncertain World is the first of two volumes. A second volume will be released in Spring 2014, and will
examine the key trends in the global agri-food system.

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