The TSR irony

Mick CalderIt is somewhat ironic to learn that the meat companies may be considering the idea of Tradeable Slaughter Rights (TSRs), when the original proposal was rejected with some disdain nearly 30 years ago, writes Mick Calder in his latest blog post.

TSRs were proposed in a 1985 report from Pappas Carter Evans and Koop (PCEK) for the Meat Industry Council, which had highlighted the problem of overcapacity of slaughter and processing facilities as well as the cost of exiting as one of the significant issues for the industry at that time. Procurement pantomimes were also in vogue; the fairy tale where the good fairy with the slightly higher price prevails over those who should know better.

The TSR scheme aimed to stimulate stronger, lower cost competitors to acquire the right to killing capacity from weaker or uneconomic plants that would presumably close.

All plants would be allocated a kill quota as a percentage of the kill, which companies could buy, sell or lease via a central register. The transfer price would compensate for the cost of closure of the uneconomic plants, while establishing a stronger operating environment for those remaining.

The idea was panned by the Meat Industry Association as not providing anything ‘anything new or profound’; the industry decided to rely on the efficiency of market forces and its own negotiated arrangements rather than accept a controlled form of rationalisation. Unfortunately, many of the proposed negotiated settlements ended up in the waste paper bin.

The irony of the review of the TSRs now is that while there were some similarities in the problem of overcapacity then as now, the whole financial and regulatory environment was quite a different box of bananas. Thirty years ago, the government was intent on deregulating almost anything that looked like a quango, but the opportunity to set up a central registration body was probably still achievable; the Quota Management System for fishing was introduced by the Fisheries Amendment Act 1986.

These days, while the rule is not completely unfettered free enterprise, the prospect of introducing a centralised, interventionist and regulated system will require some political pressure with a few industry people having to be persuaded to swallow a dead rat or two.

Its all very well for the four major companies to be talking about industry solutions but history and experience shows there are always mavericks who will kick against any suggestion that they just cave in to some scheme the big boys have developed for their own benefit. Achieving industry agreement on any scheme to rationalise the system is a big ask.

Even if the control idea is accepted the catch will be getting agreement on the size of the lamb, sheep and cattle “crops” for each year and allocating the TSRs on an equitable basis. Then there is the issue of new entrants; how do they qualify for TSRs? It is likely a central organisation equipped with the necessary regulatory authority and powers to deal with transgressors will be required. This means legislation.

While it is a mere shadow of its former self, maybe the New Zealand Meat Board could fulfill the role. It is a statutory body governed by the Meat Board Act 2004, which could possibly be tweaked to facilitate a TSR system.

Strengthening the powers of the organisation that has been so diligently stripped of them over the last thirty years would just add to the irony.

But, whether it is TSRs or any other regulated system, it is still only addressing the production side of the problem. What about a serious collaborative approach to efficient marketing?

Mick Calder says he’s a ‘generalist’ having started in agricultural science then marketing economics and trade policy, and finished in business management and administration, with elements of bookkeeping and legal drafting thrown in. His professional roles include former board secretary for the New Zealand Meat Board and later the NZ Lamb Company. He was co-author, with Janet Tyson, of Meat Acts, a history of the New Zealand meat industry from 1972 to 1997, which makes fascinating reading (Published 1999: ISBN: 0-9582052-2-1). He has written countless other reports, newsletters and articles for magazines and newspapers. He also maintains his own blog, Agriphile, at which this post has appeared.

 

 

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