Dire times in 'broken' meat industry

Federated Farmers Meat & Fibre chairman Bruce Wills. Photo / Hawke's Bay Today

It's make or break time for the meat industry with the launch of an initiative to create a strategy for the sector, says Federated Farmers Meat & Fibre chairman Bruce Wills.

Beef and Lamb New Zealand this month estimated the export lamb slaughter for the year ending September would be 21.5 million head - down 4.5 per cent on last year and two million fewer than had been forecast in December.

"There's absolutely no question that the meat industry in New Zealand is broken," Wills said.

Sheep numbers were in rapid decline, hundreds of sheep farmers every year moved to dairying or forestry and meat company profits were thin at best, he said.

A Sheep & Beef Mid Season Update in February from Beef and Lamb New Zealand forecast farm profit before tax for 2009/10 would be $39,800, using an exchange rate of US71c, compared with a provisional $58,800 for 2008/09.

And yet lamb prices are hitting record highs.

"So from an industry's point of view there's an absolute disconnect ...

"It just doesn't make sense that we have world markets crying out for our well recognised lamb, they can't get enough of it, they're paying record prices.

"Meanwhile, back on home base where we grow the stuff farmers and companies are going out of business."

Farmers looked across the fence at dairy co-operative Fonterra and kiwifruit exporter Zespri, Wills said.

"Two organisations that have got some real discipline, some real consolidation and they're making progress."

The strategy would be led by Beef and Lamb, and the Meat Industry Association, with the development process independently facilitated by Deloitte partner Alasdair MacLeod.

Phase one would study issues and opportunities across the sector from market to farm and in phase two, industry participants would collaborate to implement initiatives.

Beef and Lamb chairman Mike Petersen said work on the strategy could include meat-related products such as wool, and there could be some quick wins by the end of the year.

"We've got farmers blaming the industry for the woes they perceive are there and, vice versa, we've also got industry saying that the farmers have got to pick their act up," Petersen said.

"This piece of work will actually allow us to get some objective analysis so we can put a stake in the sand and say, look, these are the areas where we can improve and make the industry more profitable."

Companies could not be forced to do anything but Petersen was confident if the analysis was robust it would provide a big incentive to take part.

One industry player, who asked not to be named, said the initiative was the latest in a long line since the 1920s.

"You'd have to wonder what the previous 16 or 17 reports have actually achieved, wouldn't you," he said.

Sheep numbers would continue to fall while dairying was so competitive.

"I think there's a different sort of tack that you can take on it other than just this is bad because sheep numbers are going down," he said.

"Sheep numbers are going down because there's more profitable uses for the land and the meat companies have to adjust to that quickly or otherwise they'll go out of business."

Graeme Harrison, chairman of procurement, processing and marketing company Anzco Foods, said he was very supportive of the initiative.

"Obviously we can look at areas of collaboration beyond the farm gate but we've also got to keep up the efforts of improving the beef and sheep sectors' comparative position against dairying," Harrison said.

The main reason the industry was not benefiting more from record prices was the exchange rate, Harrison said.

"This time last year sterling was 33/34c, today 46/47c, you work out the numbers, they're huge."

A great concern for sheep farming was that it was dependent on meat income alone, Harrison said.

"If you want to look at really where the problems lie they lie with wool, but they have now for 40 to 50 years."