"Global demand is there but the industry is struggling to translate that into value," says one market insider. "You've got to realise that they are men with knives," he says. "And it has always been that way - there has always been that internecine conflict."
It's no wonder that Fonterra is getting some attention from over the fence.
Not long ago - 2004 - the meat sector was level pegging with dairy in terms of the value of exports. Since then, dairy has taken off.
According to the latest data, the dairy sector accounted for $11.5 billion in exports in the 12 months to April, against just $5.4 billion for meat.
Even the relatively small subset of dairy sector - casein and caseinates - contributed $911m in exports for the 12 months, just below aluminium.
Comparisons with Fonterra only go so far. Fonterra stands over the industry like a colossus and is very much in charge of the process, from the farm gate to the market. There are other players, but Fonterra is essentially the New Zealand dairy industry.
Many in the meat industry see Fonterra as an example of what can be achieved. "Fonterra's relationship with their suppliers is magnificent," says Richard Young, who heads up the newly formed Meat Industry Excellence group pushing for a stronger red meat sector. "They are totally transparent in what they do. They give farmers sound indications on pricing, which enables their suppliers to budget.
"If prices come back, they give them price indications clearly and quickly." But Young and others point out that putting a Fonterra-style structure together would not be simple because of the ownership mix in the meat industry.
"Solutions must capture more value from the supply chain which, in turn, delivers more of the margin from the end product back to all stakeholders," Young told APNZ.
Silver Fern Farms chief executive Keith Cooper says Fonterra-fanciers are quick to forget that it took several years for the co-op to evolve into its current form. He points out that Fonterra has the luxury of capital and continuity of supply from its members. Cooper says red meat farmers would have to stump up about $1.6 billion to be on a similar footing to Fonterra. "They quickly go off the Fonterra model when you tell them that," he says.
The heavy hitters in the industry are the big South Island-based co-operatives - Alliance and Silver Fern Farms, which account for about 52 per cent of the market nationally.
Alliance is owned by about 5000 farmer shareholders and is the world's largest processor and exporter of sheepmeat. Silver Fern Farms, formerly the Primary Producers Co-operative Society, represents more than 20,000 sheep, cattle and deer farmers throughout New Zealand.
Unlike its southern neighbour, Silver Fern is a hybrid - half its suppliers are not shareholders in the cooperative. Next comes Affco, a meat company that is part of South Island food group, Talleys, and Japanese-owned Anzco.
Further down the food chain is Progressive Meats, then there are the likes of Blue Sky and and Greenlea. All up there are 16 processors and 27 exporters.
Fonterra's genesis came from the amalgamation of co-operatives over several years. If the same sort of aggregation were to happen in meat, it would require co-operatives joining forces with companies - a much more complex proposition.
Just over half the industry is under co-operative control, and the rest is occupied by a myriad companies, large and small, public and private.
Though Alliance and Silver Fern are sizeable, they are not regarded as being big to enough to effect any major changes to the sector by themselves. Together, they don't have the kind of sway that Fonterra, which collects 90 per cent of the country's milk, has.
Despite its problems, meat has its success stories. The industry collaborates in the North American lamb market, which is held up as being a good example of industry cooperation and a possible marker of things to come. The sector's close relationship with with McDonalds is also seen as a big positive. Individually, the meat companies have their wins too but in the big picture, the industry is just as dysfunctional as it ever was, market insiders say.
Jeanette Maxwell, Federated Farmers' meat and fibre chairperson, who farms a sheep and beef property with her husband near Mt Hutt, says the problems are rooted here and overseas. The big meat companies have key markets they enter into exclusively, but there are others who float around the margins. Maxwell agrees parts of the industry are at odds, but she points to the North American experience, and the McDonalds relationship, as bright spots.
"It's not dysfunctional on all levels - just on some." She said good things could come from Meat Industry Excellence - which has been holding farmer meetings up and down the country - but that any solution would require greater farmer buy-in. "There is a lot of blame. The farmers blame the companies and the companies blame the farmers," she said.
Maxwell and others are optimistic that the industry is in the mood for change, but she says it has been a long time coming. "It comes up from time to time but this would be one of the few times that I have seen more openness, and more willingness to discuss it all round - and not just from grumpy farmers.
"This time, there is a much more genuine desire to have the industry change. It took Fonterra 32 years, so it's not going to happen overnight."
Ironically, New Zealand has a far more commanding position in sheep meats than it has in dairy. New Zealand is the world's biggest lamb exporter, representing 38 per cent of the global trade, compared with about 30 per cent of the global dairy trade.
According to New Zealand Beef and Lamb, there are 16 companies, with 36 plants, processing lamb and adult sheep.
For cattle there are 13 companies with 34 processing plants.
"The dairy industry has become a lot more profitable and it has given sheep farmers the option to move to a more profitable used of their land," Maxwell says.
Sheep numbers have dropped steadily over the years. "If we can deal with some of the inefficiencies, we can start becoming competitive with dairy again."
"We've got to do it sooner or later because if we continue the way we are, then the critical mass is going to be non-existent as far as lamb and beef is concerned. We are not going to have the ability to influence in the market and hold the value of our product up," Maxwell says.
"We have 27 exporters of meat all competing at the procurement and competing at the market place, so it all seems a bit wrong to me."
Silver Fern's Cooper says many of the industry's problems still come from the days when it was purely a carcass, or process-driven, industry. "I would argue that the industry is still coming to grips with how it needs to create value from the product in the market place.
"We as an industry we are very fragmented and disconnected from our supply base in terms of continuity of supply. None of us have that absolute commitment from our suppliers."
"It's very hard to rationalise the industry because if we bought another company tomorrow - 25 per cent of that company's suppliers may go off to supply another company.
"To me, the problem is that we don't have the locked-down relationship between the farmers and the meat companies. The meat companies are fragmented and there is no industry aggregation and and no collaboration in joint ventures because we are vicious competitors," he says.
Then there are the overcapacity issues. The processors are geared for a lamb kill of 35 million, not the present day crop of 20 million.
"The more throughput you get through a plant the lower the average cost of production is. It's not so much fighting, its just economics," he says.
But Cooper, like Maxwell, says there is more than a glimmer of hope that the industry may one day get its act together.
"I have never seen people so focused in agreement that there needs to be change," Cooper, a 33-year veteran of the meat industry, says.
Meat Industry Excellence's Young says an ideal scenario would be a processing and marketing structure that is controlled by farmers.
"I think that everyone accepts that the status quo is no longer an option,' he said. "Now it's a question of how the industry goes about finding a solution that is suitable for us all.
"We do have a superior product and it's just a matter of capturing the value out of it for those who process and produce it.
"None of us are making any money - we have one good year and two bad ones. No business can continue like that."
• Jamie Gray is an APNZ business reporter
