Comment: What goes around comes around?

Mick CalderWhat goes around, comes around, writes Mick Calder in his latest blog post.

After the extensive reporting on the meeting in Gore called by the Meat Industry Excellence Committee (MIEC), I was prompted to review the origins of the New Zealand Meat Producers Board (NZMPB) almost 100 years ago. The factors causing farmer concerns were different but the reactions in terms of farmer meetings and the various shades of support or opposition are incredibly similar to those being reported today.

The first few chapters of Golden Jubilee – The story of the first fifty years of the New Zealand Meat Producers Board by Dai Hayward, set out the factors (mainly an overhang of stocks in cold stores and rising costs of processing and shipping, exacerbated by the onset of the economic recession) which led to a serious decline in prices for lamb in 1920/21.

Farmers began agitating for changes to the existing business model in the meat industry to alleviate the plight of the producers. They had discussed a scheme for the co-operative handling and marketing of primary produce, but they went one step further than the MIEC and called for government assistance or intervention. Perhaps fortuitously, Prime Minister William Massey favoured setting up a Meat Pool Scheme and the establishment of marketing board involving farmers, businessmen and government representatives, with ‘any power they want’.

As could be expected stock and station agents, meat exporters and processing companies, as well as some farmers, were adamantly opposed to these ideas; some cynics would suggest they were just protecting their patch.

The issue came to a head with a meeting in Wellington on January 10, 1922, with a farmers’ conference in Wellington attended by selected delegates from around the country, with views either for or against the proposals.

There was some vigorous debate, with suggestions that the proposed scheme was socialistic. Massey countered that “there is nothing socialistic about what we are proposing. It is co-operation.” The main opposition concern was that the proposed board would take over all meat and market it, known brands of lamb would lose their identity, and/or that there were plans to wipe out all the meat operators. Some of these views had been promulgated by the meat companies.

In the end, after a day of debate, the vote was in favour of change, and subsequently a Board was established with extensive powers “to control the export meat trade”. But in its first 50 years the Board did not exercise its powers to assume complete control; that came later.

It would be disingenuous to suggest the MIEC are aiming to resurrect the NZMPB and all of its powers, let alone contemplate any government intervention, but the issues being discussed and proposals for change are remarkably similar to those of the 1920s; the economic and political climate is quite different. However, the calls for a Fonterra style structure suggests that the farming community are seeking a complete rethink of the business model with an overhaul of the meat supply and marketing chain.

The proposals particularly for marketing reform may be a reaction to the PGP proposal to use farmer-controlled reserve funds to encourage them, once again, to improve productivity, when they have been doing that almost continuously for the last fifty years. Experience has shown that farmers will respond to consistent price signals, so maybe the current agitation is a call for a better system to deliver those consistent price signals.

Even so, proposals to emulate the dairy industry could be a tad optimistic. Fonterra arose from a long established single desk marketing organisation (the Dairy Board) and mergers of a number of co-operative dairy processing companies, before they were pushed together, and the business model was cemented in place via legislation.

Setting up such a structure for the meat industry would require a significant change in thinking, not only among farmers who would have to adjust to the idea of long-term supply contracts, but also among processing and exporting companies, especially if the idea went so far as one major marketing enterprise. It may even require some government intervention in the form of legislation.

An arrangement like that for the meat industry is likely to be a bridge too far for all the parties. Some form of incremental commercial arrangement with more modest goals may be possible, if there was a willingness to co-operate. The reported discussions between Alliance and Silver Fern Farms (and maybe others) would appear to be a good start.

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 item has appeared.

 

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