KEY POINTS:
Finally, after months of on-again off-again merger and consolidation in the meat industry, we are getting to the (pardon the pun) meaty end of the debate.
Southland-based co-operative meat processor Alliance Group will hold a special meeting on Friday to vote on resolutions put forward by the Meat
Industry Action Group.
Rival Dunedin-based co-operative Silver Fern Farms will hold a similar meeting on October 7.
The resolutions don't mess about.
The group wants shareholder support for the creation of a single farmer-owned co-operative, the co-operative boards to work together, a constitutional committee with an action group-appointed chairman and more meetings in March to remove and re-elect all directors.
The objective is to create a farmer-controlled, market-led company that accounts for 80 per cent of red meat procurement, processing and marketing.
If shareholders vote "yes" then Alliance's directors will have to fall into line or they could find themselves booted out in just over six months time, while the action group-appointed committee chairman has the power to exclude anyone from regular meetings not representing the wishes of shareholders.
The Alliance board is recommending shareholders vote "no".
The resolutions, it says, give unacceptable power to the action-group-appointed chairman and undermine board responsibilities, plus a stand-alone merger with Silver Fern is poor with unacceptable risks.
If the directors believe the resolutions are not in the best interest of the company then a "yes" vote could trigger a board exodus well before six months is up.
Would it be ethical to toe the line if you think you're doing the wrong thing and would they want to work with an action group committee chairman ready to smack their hands?
Alliance turned down an opportunity to merge with Silver Fern Farms last year and then an industry mega-merger proposed by Alliance came to nothing in April, lacking agreement with Silver Fern.
Alliance says the opportunity for a wider industry mega-merger has gone.
On Friday the co-operative said it had concluded a series of annual meetings and that shareholders were not attracted to a merger with Silver Fern, particularly with the involvement of PGG Wrightson.
The resolutions need more than 50 per cent approval but Meat & Wool New Zealand chairman Mike Petersen says the view he has picked up from farmers is that the resolutions are unlikely to be approved.
"They're still really unsure about the shape of the [PGG Wrightson] initiative obviously and they are being told by the Alliance leaders ... this is not a good deal and that they wouldn't want to be a part of it," Petersen says.
Sheep farmers have faced three years of low returns.
"The Alliance shareholders fully understand the need for change [in the industry], they're just not convinced that this is the right one."
Silver Fern is holding its action group meeting on October 7 - which will be meaningless if Alliance shareholders vote "no" - but next Monday it holds a different vote on selling half the company to listed rural services business PGG Wrightson.
Word in the paddock is the PGG Wrightson deal is looking close.
However, the timing of the Alliance vote this Friday just days before Silver Fern's PGG Wrightson vote has raised eyebrows.
The argument goes that an Alliance "no" vote lodged freshly in the minds of Silver Fern farmers could be enough to scupper the PGG Wrightson deal, which needs 75 per cent support.
However, by the same token, an Alliance "yes" vote would help Silver Fern by signalling support for a merger that would boost farmer ownership in the PGG Wrightson proposal.
So take you pick - intentional ploy or simple coincidence.
In an industry which has seen its share of acrimonious recrimination, it is easy to see the vindictive in the innocent.
PGG Wrightson chairman Craig Norgate and Silver Fern see the partnership as a platform for wider industry consolidation but they back the deal on a stand- alone basis.
What happens if it fails is unclear with Norgate playing his cards close to his chest.
Failure could lead to chaos in the industry, he says, and PGG Wrightson would have to be careful how it reacts.
It's hard to imagine Norgate without a plan B for an industry he has described as a "bloody disaster", especially considering PGG Wrightson's success is inextricably linked to that of farmers.
Norgate says if you want to start transforming an industry the biggest player is a good place to start but if he fails - which with nearly 50 mergers and acquisitions under his belt is something he's not used to - what are the alternatives?
He could start lower down the ladder and work upwards, with other significant processors including Anzco Foods and NZX-listed Affco.
What are the odds on a rapid succession of smaller PGG Wrightson takeovers and consolidation, followed by the luring of disgruntled farmers with a snappy sales pitch and an offer too good to refuse?
Sounds like Norgate.
Trade winds
The Doha round of World Trade Organisation talks may have failed (for now) but the Association of South East Asian Nations, Australia and New Zealand free-trade agreement has been successfully concluded.
Federated Farmers' president Don Nicolson welcomes the deal.
"The Asean countries represent a significant proportion of our agricultural export trade, and the announced agreement to remove tariffs on agricultural products will mean a substantial gain for our exporters and economy," he says.
"We commend the Government and the work that New Zealand negotiators have put in to achieving such a great result for the country."
Trade Minister Phil Goff says the substantive conclusion of the agreement is a huge milestone in engaging with the world's most economically dynamic region.
"The Asean economies represent a market of more than 575 million people and are an increasingly important destination for New Zealand goods, service suppliers and outward investment," Goff says.
"When you consider that the Asean market for New Zealand merchandise has grown at 24 per cent per year over the past three years you appreciate the scale of opportunity this [free trade agreement] represents for us."
Asean was New Zealand's third largest merchandise export market last year, worth $4.6 billion, and the agreement will remove tariffs on all key items of trade interest.
Exporters pay about $50 million in tariffs each year in trading with the Asean, which includes Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia.
Tariffs of $50 million may not sound like much these days but a million bucks of savings flow straight to a company's bottom line, with the difference between success and failure often measured in small margins.
As Charles Dickens' Mr Micawber says: "Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery." Every little bit helps and when you step back and look at the bigger picture the benefits start to accumulate.
The Ministry of Foreign Affairs and Trade website estimates the combined gross domestic product of the 12 countries involved in the agreement exceeds US$700 billion.
In 2000 it was estimated a free trade agreement would boost gross domestic product across the 12 countries by more than US$48 billion between 2000 and 2020 with an additional US$3.4 billion to New Zealand. Ah now that's better, the warm glow of billions.
Meat & Wool New Zealand chairman Mike Petersen says the meat industry urged negotiators to keep the pressure on for full liberalisation without exclusions.
"I'm pleased that the Government took that message to the table and has been successful in delivering on it," Petersen said. "The Asean group of countries is growing fast and we expect it to be a significant market for the future."
Meat & Wool NZ says although current tariffs are relatively low, the maximums can be high and the agreement will eliminate the risk of increases. Three countries still have a bilateral market access issue to work through before the agreement is signed.
