‘Omnishambles’, is the word of the year, according to the Oxford Dictionary. Coined originally in a British TV political sitcom, and meaning ‘a situation that is shambolic from every angle’, at first sight it seems a good way to describe this week’s public showing for the sheepmeat industry. It also seems fitting as ‘shambles’ was the old Middle English word for the place where meat is butchered and sold.
High prices for lamb last year, caused in part by high schedule prices to farmers compounded by the ridiculously high NZ dollar and customer resistance to the resulting final prices, resulting in high stock levels have combined to produce announcements of combined losses of over $81.9 million by Alliance Group and Silver Fern Farms this week to add to the $605,000 loss announced in July by the ‘canary-in-the-mine’ Blue Sky Meats.
The situation was signalled earlier in the year, with price resistance being evident, but it wasn’t apparent, until the end of year accounts wash-up, just how bad the situation was. The fall-out continues. According to media reports, Alliance Group has also confirmed this week that it will make redundancy payments for up to 223 staff as a result of the closure of the Mataura sheepmeat processing plant, which it announced earlier this year. In addition, lamb schedule prices to farmers are said to be tumbling as processors react to the reluctance of European customers to pay the higher prices. Both Alliance and Silver Fern Farms have acknowledged they paid too much for livestock for too long.
The vultures gathered as the Meat Workers Union received plenty of coverage this week with its claims of ‘industry over-capacity’ and lack of leadership in the meat industry – sounding, perhaps, a little last century, but calling for government intervention. Hindsight is a wonderful thing.
Strong, but silent. Like a good southern bloke, the industry is taking its medicine. No industry comment has been made to date by any of the industry organisations or by Government. A response is probably brewing.
We know the meat export industry is resilient. It’s been around for 130 years after all. It’s also characterised by businesses: small-to-medium farming businesses supplying to mainly medium and large meat processing businesses producing product for, in some cases and from New Zealand’s perspective, gigantic global commercial concerns. All of which are subject to the current, and extraordinary, global economic pressures.
Contrary to MWU assertions, plenty is happening behind the scenes as a result of the 2010 Red Meat Sector Strategy, this year’s Riddet Institute’s ‘Call to Arms’, the Stanford University boot camp and no doubt also yesterday’s Pure Advantage Green Growth report will have sparked ideas. All of these work alongside and complement the Government’s Business Growth Agenda. All highlight the importance of the primary sector to New Zealand’s future fortunes.
Stockpiles have already been worked through, new plants are being built, like Silver Fern Farms’ Te Aroha replacement plant for the one that burned down, and old ones adjusted to cater for the shifts in geographic livestock procurement, to adjust for capacity and cater for new customer requirements.
That was all last season. This is a new season. Lessons have been learned. As Allan Barber reported at the end of October, the 2012-2013 season was looking optimistic from the European perspective following the massive SIAL food fair in Paris. Add to that global meat demand is continuing its upward trend and the the fact that New Zealand meat has an exceptionally good reputation offshore and is the envy of many other producing countries, things ain’t looking so bad.
Omnishambles? I don’t think so.