Meat inspection no longer exclusively provided by AsureQuality

Last Tuesday, AFFCO’s Imlay plant in Whanganui was the first to be allowed to introduce meat inspection by its own employees. Till then this function has been performed exclusively by government employed meat inspectors, originally employed by MAF, subsequently by the state-owned-enterprise AsureQuality, writes Allan Barber.

The proposal to allow meat companies to have a hand in meat inspection finally saw light of day about two years ago, although the companies have been dissatisfied with the government monopoly for many years. I can remember the issue raising its head in the early 1990s when the meat inspectors went on strike because of pay and conditions.

AFFCO, for whom I worked at the time, had its production disrupted by a group of employees on its plants, employed by a different employer on different terms from its own workforce and belonging to a different union, the Public Service Association (PSA). Not surprisingly, AFFCO was unhappy at this state of affairs.

But 20 years later, after negotiations and discussions with MAF, then the Ministry for Primary Industries (MPI) and a trial at Imlay, overseas regulatory authorities (notably USDA and EU) have approved the equivalence of the proposed inspection procedure.

There will still be at least two AsureQuality food safety assessors monitoring each shift and final oversight of the product remains the responsibility of the MPI Verification vets on the plant. The most significant difference will be in the total number of employees, because on all plants there have been up to 12 meat inspectors and supervisors across a two shift operation.

In future, meat workers on the chain will be responsible for their own inspection, supervised by official inspectors who must be trained to the same level and subject to the same performance checks as AsureQuality’s inspectors. There will be considerable savings from the new system which the PSA argues will place an undue emphasis on production at the expense of food safety.

MPI released the proposed Post Mortem Inspection regulations for cattle, sheep and goats and asked for submissions by 13 July this year. The response, from what I assume was the PSA, raised several concerns about the risks to New Zealand’s reputation for safe food which the current inspection model had guaranteed for more than three decades. MPI’s replies to the objections indicated its satisfaction with the proposed process which overseas authorities had already approved.

In its submission, the PSA also stated its willingness to discuss opportunities for more flexibility and productivity gains. This all sounds constructive, until one realises the meat companies have been trying for at least 20 years to do just that without success.

A further four meat plants – Alliance Smithfield, Silver Fern Farms Pareora, Riverlands Blenheim and AFFCO Manawatu – will adopt the new company meat inspection procedure by the end of January 2013. At this point, a review will be conducted before approval for a rollout across the industry over the next two seasons.

Kelvan Smith, AsureQuality’s group manager operations, says that the SOE accepts what is happening is inevitable, but wants to make sure it has a clear understanding of the industry’s timetable for the change. His main concern is to manage the impact on employees of what is likely to be a 50 percent reduction in staff numbers by the end of the process.

It is possible that not all meat processors will want to change from the present system, especially if they have a good working relationship with the meat inspectors working at their plants. However, cost pressures make this unlikely, if the new arrangements work well. The PSA and its affected members will be keeping their fingers crossed.

 

Boot camp stimulates insights

The outcome of the Boot Camp, which was held two weeks ago at Stanford University, has not – for obvious reasons – been widely trumpeted, writes industry commentator Allan Barber.

 

After all, the objective was never to produce yet another sector strategy, long on analysis of the problem and short on achievable actions to produce a state of nirvana.

Bill Falconer, chairman of the Meat Industry Association, was chosen as the spokesperson for the Boot Camp because he did not represent a single company, but an industry body. The senior executives who attended did not see the merit of or justification for purporting to speak on behalf of their peers from a wide range of rural sector businesses. Therefore, Falconer was the obvious person to speak on their behalf.

The Boot Camp’s objectives, simply stated, were seen as:

  1. To allow the attendees to learn from the professors and to visit US companies in different industries, which would enable them to see how to become consumer driven.
  2. To take six days out of day -to-day business and examine their business from a different perspective.
  3. To see how or whether individual companies could collaborate to their mutual advantage.

Falconer told me that is was one of the most stimulating and encouraging gatherings he had attended, with 20 CEOs and top managers from across the agricultural sector learning from six outstanding marketing professors how to lift their game for the benefit of their companies, industry sectors and agribusiness as a whole.

The conclusions from the Boot Camp can be looked at against the backdrop of the Government’s growth agenda to double exports or otherwise expressed as lifting exports from 30 percent to 40 percent of GDP by 2025.

The visits to companies near Stanford were immensely helpful in gaining an understanding of how the export target might be achieved. The first important conclusion is that there is no point in increasing production on-farm, or in any other environment for that matter, unless you can sell it.

In order to start working out how to sell the extra production, an understanding of consumer demand is necessary, becoming market- not production-driven and planning how to lift performance accordingly. A major insight was the scale of social media used by all the companies visited, a country mile ahead of any New Zealand company, including Icebreaker, which is seen as a leader in the New Zealand context.

I suspect, although Bill Falconer didn’t say so, that tangible results from the Boot Camp will of necessity be slow to eventuate. Nor is it likely that companies will feel the need to make a lot of noise about any specific programmes they develop, either in collaboration or on their own, until there is something concrete to report.

However, if the Boot Camp has achieved a change in attitude about the nature of the task and provided a blueprint of how to go about lifting sales and marketing performance, this will prove to be the best outcome. There has been too much navel-gazing analysis of the size of the problem and the same old strategies to solve it, without any real change in behaviour.

Ideally, agribusiness needs a Messiah to preach the new marketing gospel until the sector as a whole becomes customer- or consumer-driven.

Overseas investment bill defeated

The Greens’ private members bill restricting, in other words banning, all sales of farmland of more than five hectares to an overseas investor was defeated last week by two votes, writes Allan Barber in his latest blog.

In the article which has also appeared at interest.co.nz, he argues that the Labour Party’s new position,”in support of the Green’s xenophobic attempt” suggests the party has moved light years away from its position of five years ago, when it issued the ’2007 Export Year’, “which says nothing significantly different” from the recently released progress report ‘Building Exports’, part of the current National Government’s Growth Agenda.

“Without overseas investment and shackled by our high debt level, New Zealand cannot possibly aspire to the optimistic export goals of successive Governments from both sides of the political divide,” he says.

He talks to Federated Farmers chair Bruce Wills and compares the NZ situation to Australia’s and concludes that New Zealand can’t afford any reduction in the relative contribution made in 2011 by meat, dairy, wool and horticulture (43 percent of export goods or 34 percent of goods and services), whether or not any progress is made towards the Government’s target.

“Changes of the kind represented to Parliament last week would present a massive head wind.”

Read more …

Business Growth Agenda a big stretch, says Barber

The Government’s Business Growth Agenda progress report on Building Export Markets specifies the target of increasing New Zealand’s exports from 30 percent today to 40 percent of GDP by 2025. It’s a big stretch, says meat industry commentator Allan Barber.

The progress report states that primary sector exports have outpaced the rest of the export sector, growing by half in real terms since 2000 at an average productivity growth rate of 2.1 percent per annum. To achieve the target of 40 percent of GDP, agriculture will have to maintain its growth rate for the next 13 years, while the rest of the economy must lift its game considerably. Manufacturing and services have been increasing by one percent a year and need to lift this to five percent over the coming decade, or alternatively agriculture will be required to expand further to bridge the gap.

This is an enormous challenge, equivalent to creating 250 more knowledge-intensive businesses creating $100 million from exports a year. The report cites Navman as an example of the type of business required. How many more like this can we think of? Not many, so it is highly improbable that these new businesses will emerge from areas totally unconnected with agriculture.

Primary sector exports will therefore have to increase by quite a bit more than the average of the past decade, if the target as a whole is to be reached.

Using a different report and set of figures the Riddet Institute in its recent Call to Arms report challenged the primary sector to treble its exports to $60 billion by 2025, equivalent to New Zealand’s total exports of goods and services today. However exports of $20 billion are only one third of the total. These figures emanate from the Government’s Economic Growth Agenda.

We can quibble with the different measurements and totals used to arrive at the conclusions (GDP, total exports, growth rates), but the fact remains, it’s one hell of a big stretch to see how to reach the target. The goal of the Boot Camp taking place at Stanford University this week is to see whether like-minded companies can develop the strategies required to bring agriculture up the value chain, enabling the sort of increase envisaged.

The question is whether the Government’s progress report on the activities of the Business Growth Agenda will contribute to the big goal and, if so, how significantly. It is a big ask, because it demands growth of between 5.5 percent and 7.5 percent, depending on the economic growth path, compared with Treasury’s forecast for the next three years of 1.8 percent.

The report says with a degree of understatement that “to achieve our target will require a concerted effort to develop more internationally competitive businesses in both the commodity and high-value technology-based sectors.” This may be official speak for ‘we know we haven’t got a hope, but we have to start somewhere.’

The key planks of the export growth development strategy are: Delivering a Compelling New Zealand Story; Improving Access to International Markets; Increasing Value from Tourism; Making it Easier to Trade from New Zealand; Growing International Education; Helping Businesses Internationalise; and Strengthening High-Value Manufacturing and Services Exports.

The progress report finishes with a summary of the strategies under each of these headings and Progress Indicators listing detailed actions underpinning the strategies. There is an enormous amount of work going on, notably in trade negotiations, removal of red tape for business, trade missions into key markets and tourism developments such as SmartGate at the airport.

But all work on developing a compelling New Zealand story is listed as a new project which indicates one of the major problems encountered in lifting our exports as a percentage of GDP. There is no agreed brand image under which all New Zealand’s exports and tourism experiences are promoted. The meat industry’s main brand has for a long time been New Zealand Lamb which has been very successful, but a major complaint has been the competition in export markets between exporters. Apart from North America, cooperation has been seriously lacking.

Part of the problem has been the complete lack of a generic New Zealand brand image. Development of this with a believable and compelling story to back it is an absolute priority, because brands take a long time or a lot of money to gain awareness, probably both.

This progress report is the first of six with the other five to come being Innovation, Skilled and Safe Workplaces, Infrastructure, Natural Resources and Capital Markets. Obviously these other areas will play an important role in achieving the export goal.

The Government deserves credit for coming up with a coherent strategy, but it will have to generate a tremendous response from the private sector if the goal is to come close to being realised. Another challenge is the high proportion of SMEs in New Zealand which must be inspired to pursue the new business opportunities capable of converting them into large businesses with the requisite scale.

This article has also appeared at interest.co.nz.

Market will cope with extra lambs

The market should be able to cope with the expected one million more lambs this season, suggests meat industry commentator Allan Barber.

Responding to recently released figures from B+LNZ Ltd’s Economic Service Barber points out that last year’s 4.4 percent reduction led sheep numbers to an all time low and that this season saw a bounceback of 2.6 percent, largely from an increase in ewe hoggets.

“Providing adverse weather doesn’t cause larger than anticipated lamb losses, there is every reason to expect one million more lambs on the ground this season,” he suggests, adding that this will prompt the question as to whether the markets can absorb the extra lambs, given the flat state of most overseas economies and the significant amount of inventory clogging up the pipeline.

“Past experience suggests that the pipeline will free up, so buyers will hopefully start to place orders again in the not too distant future. In addition, the growth last season meant that farmers held back stock and continued to put weight on. At the same time, meat exporters failed to give the right market signals soon enough, because they had to keep prices high to secure throughput,” explains Barber.

“Assuming the law of climatic averages reasserts itself, the coming season will return to more normal conditions. Therefore, the conflicting messages of procurement and market price will not be so far out of kilter again and supply and demand will be more complementary.

“If not, we will have to pray for an outbreak of rational behaviour from producers and processors!”

Barber notes that the changing nature of land use in New Zealand can be seen from the fact that the North Island is now home to more sheep than the South Island for the first time in living memory. At the same time, the South Island, assisted by irrigation, now has 35 percent of the country’s dairy cows, “a proportion which was inconceivable 15 years ago,” he says.

 

Forming a ‘coalition of the willing’ more important for Boot Camp, says Barber

Forming a ‘coalition of the willing’ – those who want to work together to get further up the value chain – is more important than forming a new Agri-Food Board, says meat industry commentator Allan Barber.

In an item published online last week on interest.co.nz, he writes that although the proposed Agri-Board will be discussed at the forthcoming agri-food chief executives’ Boot Camp at Stanford University, “it is unlikely to be the main thrust of the gathering, which is intended to generate alignment an co-operation between and within agri-foods sectors.”

While there is “much logic and common sense” in the recent Riddet Institute’s report Call to Arms, calling for a trebling of agri-foods turnover, there is “nagging suspicion that it is just another strategy document, which, despite its stated intentions, will not result in a significant shift in behaviour,” he says.

He suspects that among the Boot Camp participants there will be many of those people who would be expected to be on an Agri-Foods board. “However, they will be too busy getting on with translating ideas into action to have time to worry about joining another board.”

Read his full article here …

Meat price outlook is positive in spite of short-term wobbles

The exchange rate and uncertainty in the Eurozone remain the biggest negatives for red meat exports in the short-term, but industry commentator Allan Barber believes the outlook is sill positive heading into next year.

“It’s very hard to pick what will happen in Europe, which will inevitably have a large impact on lamb prices for the foreseeable future,” he says. “Southern Europe and the UK are technically in recession and are unlikely to improve much, at least until the European Central Bank (ECB) manages to sort out how it will cope with the trials of Greece, Spain and others.

“But the longer term prospects for lamb are still favourable, once inventories from the season just completed have moved through the trade.” Read more ….

Win-win at last for AFFCO and workers, says Barber

It was a hell of a long time coming, but the return to work for AFFCO’s workforce, or at least the half who were on strike or locked out has finally arrived, comments Allan Barber, in an article which appeared in NZ Farmers Weekly  this week.

Ninety-five percent of the union members ratified the settlement by Monday last week which is a substantial majority, although it makes me wonder why the other five percent still wanted to hold out. Both sides are heralding a good outcome, which I suppose is what you would say after a three month dispute has been settled.  Read more …

KPMG’s Agribusiness Agenda points the way forward

Link

The KPMG Agribusiness Agenda 2012, released this week, contains interesting observations which have been gathered from conversations with nearly 100 business leaders, says Allan Barber, who recently reviewed the report.

But like most strategy documents I have ever read, the conclusions never quite seem to live up to the anticipation. However, this is a solid document with good ideas. Read more …