After a year where increased killing of sheep from dairy conversions masked the swing from that land use, lower processing figures now, are affecting profits.
How the industry adapts, and what the cost is of surplus processing capacity, will determine sheep and cattle's future.
Outside capital is now having a large influence in dairy's expansion both on farm and further down stream, and it will be interesting to see if any is attracted to the traditional meat sector.
Blue Sky reports, its future is reducing processing costs, by way of investing in automated processing technology and/or increasing returns from by products.
Blue Sky Meats has reported a "disappointing" annual net profit of $1.16 million saying it and other meat processors have been pressured by lower stock numbers and other challenges. Revenues totalled $85.07m in the year to March 31, down from $100m the previous year.
"South Island slaughter figures for lamb and mutton are down 15.2 per cent for the 12 months and Blue Sky Meats has to take its share of that," Cooney said. "This followed the [abnormally] high kill in April, May and June of the previous year as sheep farmers killed capital stock."
The sector's outlook was likely to be fashioned by the industry's outlook and national politics rather than decisions by individual companies. Important issues included the reaction of NZers to foreign investment in land and processing plants, and the country's changing water policy.
Cooney said the Invercargill processor continued to explore opportunities to either reduce processing costs or increase returns from by-products. Blue Sky Meats had invested in an ovine automation project to develop automated processing for the sheep meat sector. It was also likely to be investing in capital projects that would improve its profitability.