KEY POINTS:
Dunedin-based meat processor Silver Fern Farms and the Meat Industry Action Group have avoided a court room dust-up after reaching an agreement about a special meeting.
The action group has requested meetings at Silver Fern and rival co-operative Alliance Group and is seeking shareholder support for the creation of a single farmer-owned co-operative.
Alliance will hold its meeting on September 5 and Silver Fern set a date of October 7 - a month after it holds another vote on plans to sell half the company to listed rural services business PGG Wrightson.
The action group was concerned that the voting power of Silver Fern's farmers could be weakened and wanted its meeting held at the same time as the PGG Wrightson vote or earlier.
The action group was heading to the High Court at Wellington to get the date moved forward, but group chairman John Gregan says following an agreement the October 7 date will stand.
"But they've also agreed that PGG Wrightson, if they are partners at that stage, will not be eligible to vote, hence farmers will be able to put them [resolutions] through if they vote in favour of it."
The Silver Fern meeting could be either ground-breaking or irrelevant depending on the outcome of the earlier Alliance vote.
"It takes two to tango, and if only one of them is going to sit round a table then obviously there's nothing to talk about," Gregan says.
The action group's resolutions also call for the boards to work together to create a national champion, a constitutional committee with an action group-appointed chairman and more meetings in March to remove and re-elect all directors.
An objective of the action group is the creation of a farmer-controlled, market-led company that accounts for 80 per cent of red meat procurement, processing and marketing.
Silver Fern accounts for about 33 per cent of sheep meat exports and 35 per cent of beef, while Alliance accounts for 27 per cent of national sheepmeat production, nearly all of which is exported.
"We feel the shareholders are just sick of this bickering between the two companies and the fighting that goes on to get the lambs, and then the fighting to sell them in the marketplace," Gregan says.
Alliance turned down an opportunity to merge with Silver Fern Farms last year, while a bigger industry mega-merger proposed by Alliance collapsed in April, lacking agreement with Silver Fern.
The Alliance board is recommending shareholders vote against the resolutions, saying they give unacceptable power to the action-group-appointed chairman and would undermine board responsibilities.
Alliance says the business case for a standalone merger with Silver Fern is poor with unacceptable risks.
A merger is likely to require plant sales to get Commerce Commission consent, not generate material gains in the market which would flow through to shareholders and will not of itself lead to consolidation of 80 per cent of the sheep meat industry, Alliance says.
Meanwhile, Silver Fern Farms has written directly to Alliance shareholders asking them to support a merger of the co-operatives, saying it wants to start talks as soon as possible after its PGG Wrightson vote.
Alliance wrote back to its shareholders describing the Silver Fern letter as self-serving, with promotion of a merger being used to encourage support for the partnership with PGG Wrightson.
Alliance says it reviewed the business-case summary for the PGG Wrightson deal and is not attracted to a merger, highlighting a number of concerns. Silver Fern then wrote again to Alliance's shareholders to counter the claims and concerns of the Alliance board.
Meanwhile, Silver Fern's farmer shareholders have a 64-page independent report by Grant Samuel on the proposed PGG Wrightson deal to digest.
Of course, in between trying to keep abreast of all the developments, farmers still have to nip outside now and again to do a bit of farming.
Farmers are faced with decisions that could fundamentally change the structure of the industry, and the permutations are building.
If Alliance shareholders vote "no" on September 5, it would scupper the plans of the action group and could also wound Silver Fern's PGG Wrightson vote due only three days later.
If successful, PGG Wrightson will own half of Silver Fern but is happy to see its stake reduced through industry consolidation, and a merger with Alliance would strengthen farmer ownership.
The prospect of greater farmer control could calm those undecided farmers concerned about giving up a fully-owned co-operative.
Federated Farmers Meat & Fibre chairman Bruce Wills thinks the PGG Wrightson deal will slip in, but there is something of a geographical divide among farmers.
"My sense would be, if the vote was to be just among North Island farmers, I think the [PGG Wrightson] deal would go through no problem at all.
"But it would be a lot harder, if it was just in the South Island, to get that 75 per cent because of the close ties that they've traditionally had with the co-operative model down there."
Alliance has seven plants in the South Island with one in the North Island, and shareholders will have one eye on Silver Fern's PGG Wrightson deal because although they are not directly voting for it, that is what they could get.
Plus, the action group says some farmer control may have to be given up to build a national champion.
So Alliance farmers voting "yes" to the action group need to be comfortable with the idea of sharing ownership with PGG Wrightson.
And among all the maelstrom of possibilities is the chance that nothing at all will happen - everybody votes "no" to everything.
Meat & Wool chairman Mike Petersen says it is a 50/50 call at this stage whether the PGG Wrightson deal will go through.
"If you had the vote today I think it would struggle to go through to get 75 per cent [approval] but look I'm sure that over the next few weeks there'll be a lot of information that will be helpful for farmers making up their minds."
Petersen's greatest fear is that rising meat prices will make farmers complacent about the need for serious change in the industry.
"I don't want to see that happen because these increased prices are happening in the absence of any strategic or structural change, and we believe that needs to happen."
RAINY DAYS
Farmers have faced the extremes of weather this year, with the summer drought followed by bucket loads of winter rain.
According to the National Institute of Water and Atmospheric Research, rainfall in Dargaville from June 1 to last Thursday was 28 per cent above average, at 474mm. Hamilton was 42 per cent above average, at 505.5mm, Lincoln was 117 per cent above average, at 290.6mm and Oamaru was 75 per cent above average, at 168.6mm.
Animal and farm improvement co-operative LIC's Northland FarmWise consultant, Neil Smith, says Northland's heavy soils are saturated and cannot recuperate at the normal rate, with cows going into a second grazing round with pastures shorter and affected by pugging.
"Mating is one of the most critical times on the farm and that's only six or seven weeks away for most farmers, so they have to act now to minimise pasture damage and maximise cow condition and health," Smith says.
Farmers needed to take action by buying supplementary feed, standing all cows off the pasture and consider reducing milking to once a day.
Cows adapt readily to changes in milking pattern without extreme impact on production, Smith says.
"De-stocking is also an option worth considering," he says. "Look at every animal on the farm, including those cows which aren't producing, and get them off, leaving available feed to cows which are holding their own."
Federated Farmers president Don Nicolson says there are massive regional differences in rainfall but no one had called for help.
"My gut feeling is that the farmers know exactly what actions they have to do.
"They will already be implementing feed budgeting and management plans ... and it can be a very costly exercise," Nicolson says.
"I would like any areas of concern to be highlighted to me and I've had none so far."
It was important that farmers build or hold buffer stocks for when the environment did turn against them, he says.
"So that they've got sort of three to six months feed stored up - and that's the concern I have, that those feed stocks are well and truly dwindling."
