The Red Meat Sector Conference heard about various ways farmers can improve their performance in the face of cost increases and lower than desirable meat returns. These messages came from an individual farmer, the chief executive of New Zealand’s largest corporate farmer, and a market researcher, writes meat industry commentator Allan Barber.
The first presentation was by John Ford, owner of Highland Station with his wife Catherine and winner of the Ballance Farm Environment Awards 2015. John took part in a panel discussion which addressed the topic of what an environmental social licence to operate meant to the sheep and beef sector. He told the audience how they follow profitable and sustainable farming policies based on a 100 year vision of maintaining a successful farm business for future generations.
Highland Station has a mixed farming practice which includes bull beef because they are easier on the land, provided they are not near cows at the wrong time, beef cows and an eczema resistant Romney X sheep flock. The environmental policy includes establishing a series of dams, avoiding nitrate leaching into the waterways, no soil erosion and areas of native bush.
The net result of this is a business which is both environmentally responsible – hence the Ballance Award – and extremely profitable, in John’s words much higher than average and with a tax bill that exceeds some farmers’ net income.
The following morning during the first official business session of the conference, Steve Carden, chief executive of Landcorp, took the delegates through the company’s main strategies to manage when income doesn’t rise, but costs do.
There are three key ways to achieve this: embrace agricultural technology including biologicals, seed technology, health and nutrition, and information; Landcorp traces all its livestock by EID and manages all animals individually, based on mobile technology. He made the point people love innovation almost as much as they despise change.
Second, tailor farm systems to consumer requirements, focusing on health and wellness, environmental sustainability and producing premium products. He expressed the opinion consumers look for value which is a combination of benefits and cost; while New Zealand agriculture is generally good at controlling cost, it is bad at promoting benefits. Landcorp has launched its own brand Pāmu – which means ‘to farm’ in Maori – as a means of differentiating its premium quality products like NZ Merino for Danish indoor shoes.
Its third strategy is to future proof its business by seeking alternative sources of income to meat, such as sheep milk and partnerships with internationally recognised brands like Daniel Hechter.
Marc Elliott from UMR Research told the conference about a qualitative study involving 30 top performing sheep and beef farmers with a control group of 28 mid-tier farmers as part of the Primary Growth Partnership (PGP) programme, the Red Meat Profit Partnership. The top performers share several characteristics: they are passionately driven by sheep and beef farming, they achieve very good returns, they know what has to be done to perform, they pay close attention detail, they are determined to leave a legacy for future generations and, most essentially, they know how to execute (or in old parlance they convert words into action).
Profit results of the very best performers in the research are 8.6 percent return on assets, compared with 6.5 percent average ROA for the top 30 and around one percent for those at the lower end. This suggests that profitability is not about industry structure or commodity cycles, but all about performance.
Allan Barber is a meat industry commentator. He has his own blog Barber’s Meaty Issues and can be contacted by emailing him at allan@barberstrategic.co.nz.
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